Many UK readers will recall how chancellor Norman Lamont saw "the green shoots of recovery" in spring 1992, before most of the pundits of the time could detect an upturn. Now, 10 years later, are there signs that the worst is over for the world's big economies?
The answer is a qualified "yes", although not at first sight. In the UK, National Statistics revised its estimate for growth in the fourth quarter of last year down from 0.2 per cent to zero, which meant the economy was at a standstill. Nevertheless, gross domestic product (GDP) growth in 2001 as a whole was a respectable 2.4 per cent. If the fourth quarter marks a trough in the economic cycle, it will be 10 years since the economy last experienced a quarter of contraction, a laudable performance for a country that was once described as the sick man of Europe.
The size of the economy--in the case of the UK, about 991 billion [pounds sterling]--can be measured by counting incomes, output or expenditure. The last two of these are more widely used and show how unbalanced growth has been in the past year.
In terms of output, agriculture, forestry and fishing (a small part of total GDP) contracted by 5.2 per cent, and manufacturing by 2.3 per cent. The total production decline was 2.2 per cent. On a more positive note, service industries expanded by 4 per cent. Business services and finance led the way with a 5.4 per cent rise, followed by transport, storage and communication with a 5.2 per cent increase.
If you look at expenditure, household spending grew by 4.2 per cent, whereas investment expanded by only 1.1 per cent and exports by 0.8 per cent. Is it any wonder that companies and their suppliers reported such different results last year?
Looking ahead, the latest Chartered Institute of Purchasing and Supply purchasing managers' index (PMI) suggests that the worst may be over for the manufacturing sector. For the first time in a year, the PMI has risen higher than 50--the level that indicates expansion rather than contraction. It hit 50.1 in March, an increase from 46.5 in February. Although this is hardly proof that things are getting better, at least it is a move in the right direction.
Other surveys, such as the CBI's, also suggest that better times, or at least times that are no worse, lie ahead for the manufacturing sector. The service sector appears to have bottomed out too. As a result, the UK economy is forecast to grow by 1.9 per cent this year, rising to 2.9 per cent in 2003.
But increasing exports of manufactured goods from the UK to the European Union will be a problem, since continental Europe is still stuck in a rut. The euro area's PMI rose from 46. …