Still a long way to go
Economists are predicting the UK economy will return to growth in the third quarter, prompted in part by the news that UK retail sales were 3.3 percent higher in July than they were a year ago. If this does happen it signal the end of the recession, which is defined as two consecutive quarters of negative growth.
These figures came from the Office of National Statistics, which also revealed that the May-July three month period saw sales volume up 1.6 percent on the same period a year ago and up 1.3 percent on the February-April 2009 period. Back to July, the rise was driven primarily by sales at clothing stores, which rose by over ten percent, and non-store retailing and repair, which rose by nearly 13 percent.
Other positive indicators in the UK include the news that mortgage lending in the UK was 26 percent higher in July than in June and that repossessions fell by ten percent in the second quarter compared to the first. The US is also expected to return to growth in the third quarter, and Japan, Germany and France already have.
All this has come at a hefty price, however, mainly in the form of massive public sector borrowing in order to fund a raft of stimulus measures such as the bank bail-outs and the VAT cut. Tax revenues also inevitably fall during a recession as people and businesses earn less money.
July is a month in which the public purse is usually expected to be in surplus, due to corporate tax payments. Given the extraordinary economic circumstances a deficit of £500 million was expected for July, but it turned out to be 16 times worse than that with an £8 billion shortfall.
The need to pay off public debt, which is now more than half of total GDP at £800 billion - its highest level since 1974 - will ensure any economic recovery is sluggish at best. Public sector lay-offs and tax rises are surely inevitable if the country's finances are to be got back under control.
