Green shoots watch: More cautious optimism from the CBI

Smarta was greatly surprised by a report from employers’ organisation the CBI this morning which, after a gloomy speech by director general Richard Lambert on Thursday, indicated things might not be quite as bad for the economy as previously thought.

While not exactly good news, it’s news we can afford to be cautiously optimistic about: a ‘slow and gradual’ recovery will begin at the start of 2010, with an expansion of 1.25% set to take place.

Keep the champagne on ice, though: the CBI says the economy is likely to contract by 3.9% this year – in comparison to the Chancellor’s more optimistic prediction of 3.5%. By the end of the recession, said the group, the economy will have shrunk by a total of 4.8%.

Lambert said there’s still too much optimism over green shoots. “The return to growth is likely to be a slow and gradual one; difficult credit conditions are still affecting business behaviour.

“For positive growth to return, lenders need to feel more confident so credit can start flowing again.”

The predictions represented a start contrast to figures from the National Institute of Economic and Social Research (NIESR), which estimated last week that the British economy had actually expanded during April and May.

“The recession is over or... close to over,” the institute’s director Martin Weale said.

For now, Smarta thinks it’s more inclined to agree with the CBI’s view – but it waits with baited breath for the next results.


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