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“HALF OF UK REGIONS RETURN TO GROWTH”

RBS is out with a report that is somewhat positive on the economic outlook in the UK.  Stephen Blackman, senior economic advisor said:

“Half of UK regions returned to growth in May, lifting the aggregate index into expansion territory for the first time in over a year. Southern England led the way, although the improvement on the month was fairly broad-based. Even so, it is hard to escape the feeling that the UK economy’s glass is half empty rather than half full. Demand is still very soft, as evidenced by the weakness of pricing power and the further decline in employment levels. Against this backdrop, the recent stabilisation will be as difficult to sustain as it was to achieve.”

ukregnThe improvement is certainly a positive sign, but the UK, unfortunately, is suffering from all the same long-term problems the U.S. is suffering from.  You could actually make the argument that the UK is suffering from even larger problems because their housing bubble was substantially larger than the U.S. housing bubble.  A recent KPMG report emphasizes just how drastic their employment problems are in addition to their housing issues.  Fitch doesn’t expect the economy to rebound before 2010.

Much like the U.S., it’s encouraging that the UK is beginning to see signs of life and a move off the sharp trough of Q4 2008, but that doesn’t mean recovery is on the horizon or that it will be strong.

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