The broad tone of business related news over the last week is still not surprisingly focused around the effects of the recession on companies as well as trying to establish whether there are signs that a recovery is imminent.
Job security and consumer sentiment are being looked upon as being the main barometers, as the government’s questionable ethos that the recession will need to be spent its way out of are reflected at street level. Matters seem far from clear with the news that Jaguar is still set to cut further jobs and stories appearing in the broadsheets that workers are taking less sick days for fear of being singled out in any round of redundancy. This is in spite of the warnings that swine flu pandemic still might affect a wide range of business activity. On the counter balance there are reports concerning imminent strikes again by postal workers. Official unemployment figures show an increase of 281k in the quarter to end of May taking the total to 2.38m as expected in this column last week. It is still forecast that this number could approach the 3m mark as the recession continues to bite and making any strong recovery difficult. Worryingly the hardest hit are the young and graduates.
The volatile retail sales figure managed to find a 1.4% monthly gain which prompted Bank of England figures to proclaim that the economy has indeed bottomed out. There were also reports from holiday companies that bookings are on the increase with Pontin’s reporting a 25% rise over the last quarter. This however may be more indicative of the manner in which people choose to spend their money on holidays as airlines have seen a massive drop in premium flight travel and think that this trend could easily take 5 years to recover.
The banking sector retains its share of page space with the government saying it will be reducing holdings of banks within months but will retain majority holdings for several years, whilst the IMF says that UK commercial banking sector remains weak and needs shoring up. In a markedly obvious comment it also points that public borrowing needs to be reduced drastically. The Sunday Times carried an article talking about lending capacity of majority banks still being largely restricted as they try to re-build capital base. Despite pressure being applied from a number of places to kick start the economy by lending more, it is important to remember that banks were close to collapse merely months ago.
Politics and banking are currently never too far from each other and the Conservatives made clearer their plans on how to tackle banking issues by suggesting the breaking up the one-stop shop style of banks into more manageable units to avoid them becoming too big to fail again. In addition they plan to hand the banking supervisory role back to the BOE at the expense of the FSA.
Another popular topic is still house prices – again. The love affair continues with numerous vested interests heralding the bottom with Rightmove claiming a 7% rise in asking prices so far in 2009 following the 20%+ collapse from summer 2007. However the number of caveats that any forecasters care to place on their predictions highlight the real picture – prices could go up due to lack of supply, they may stay flat due to lack of mortgage financing, or indeed prices could well see a double dip with a further 10% fall if the jobless numbers continue to rise. Take your pick.
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