Not Just A Swallow?

It would seem that those on green shoots watch have had a whale of a time over the past couple of weeks with a number of positive bits of economic news emerging, as well as the apparently successful G20 summit in London.

The banking situation seems to be improving, with the news of record profitability for Wells Fargo in the US, and reports of a marked increase in the amount of loans being written under the Enterprise Finance Guarantee Scheme.

There are continuing signs of relatively robust consumer activity, and with property prices seemingly within sight of the bottom, cash buyers are interested again. A 90% mortgage product has recently been introduced by HSBC which could provoke a small boost to the housing market.

Also, although they have significantly increased, insolvencies and repossessions have not reached the predicted levels.

Then there are the many people who are securely in work and have been benefiting from significantly reduced mortgage payments. Once they have paid off some debt, they will be looking to spend again, although without necessarily borrowing to do so.

All the above would seem to support the idea that there are some signs of confidence returning, and as we all know it is confidence rather than credit which will drive economic recovery.

This blog has made no secret of its belief that the economy, or more pertinently the ordinary people and businesses that inhabit the real economy, is more resilient and positive than the various media outlets have given it credit for, and that many businesses have acted decisively and imaginatively to combat the impact of the downturn (one reason perhaps that the retail apocalypse predicted for the quarter rent day of 25th March did not come to pass was that fact that many businesses had already negotiated better deals with their landlords).

However there are still a number of macro economic clouds on the horizon, including the number of large corporate refinancings that are due over the next year or so, the state of government finances and the medium term action that will be required to improve them, and the feeling that for all the talk of deflation, the underlying inflation rate remains at a persistently uncomfortable level. Unemployment is also likely to increase further during the rest of the year.

As Aristotle is credited with saying “One swallow does not a summer make”. The selection of positive news above does not mean that the current economic problems have gone away. Careful planning and flexible use of resources remains the key, whether it is developing a new product, investing in new capacity or taking on new people, particularly at a senior level. There are some reasons to feel good at last, but that does not mean caution should be thrown to the wind.