Page last updated at 16:31 GMT, Sunday, 12 April 2009 17:31 UK

Green boots of recovery

By Nick Holland
Business and economics reporter

A pair of green boots
Are match fees to play football a new economic indicator?

I am not a keen gardener but I can usually tell the difference between the green shoots of a plant and the roots of a gnarly weed. If only I could say the same about the economy .

There have been faint glimmers of life but it is hard to know whether they will blossom or wither away.

  • The FTSE stock market has risen 10% since 3 March, its lowest point in recent times
  • A recent Bank of England survey found it was getting slightly easier to get a loan
  • There was even a small rise in mortgage approvals in February, according to the Bank of England.
I judge it by the fact on a Saturday afternoon ... it has been easier to collect match fees
Andy Brough manager of the Schroder Mid UK 250 Fund

These are all fragments of hope, but do they prove recovery is underway?

'Shoots have arrived'

Stock markets are often seen as a leading indicator of what is happening in an economy.

They are quick to detect changes in levels of confidence, one of the ingredients many argue is missing from our economy.

So, if you are searching for green shoots, the markets are one place to look.

Larry Kantor from Barclays Capital
Larry Kantor is optimistic the worst is over

"The Green Shoots Have Arrived," was the unequivocal title of a report last week by Barclays Capital, the trading arm of Barclays Bank.

"We believe that the latest rally will have stronger legs, and thus marks an inflexion point," said head of research Larry Kantor.

Based on his reading of the global economy, the recovery is sustainable and investors should return to the market.

But some economists warn the gains are too small and won over too short a period of time to suggest a meaningful trend. There have been false dawns in the past.

Football factor

"I judge it by the fact that, on a Saturday afternoon, I have noticed in recent weeks that it has been easier to collect the match fees," says Andy Brough, captain of the Alexandra Park 7th XI.

"There are some small signs that some credit conditions are easing"
Sir Alan Budd, former MPC member

He also happens to be the manager of the Schroder Mid UK 250 Fund.

It sounds like an unconventional way of assessing recovery, but what he is saying is people are beginning to spend their money more freely - another sign that the economy is picking up.

Interest rates have come down, so too have oil and commodity prices, giving some consumers more money.

"If you're in a job and you drive a car, then the amount of disposable income that you've got is up about 20% in 2009 on 2008," says Mr Brough.

But while the cash may have made its way into consumers pockets, it is not clear they have yet got the confidence to go out and spend it on big ticket items.

'Liquid mortgage market'

What about the housing market? One of the problems homebuyers have faced is they could not get a mortgage.

But if more people are able to buy houses now, it would suggest banks are lending again.

And property is starting to sell, according to Peter Rollings, managing director of Marsh and Parsons Estate Agents in London.

He says he can see demand slowly returning to the market.

Browsing properties on offer
Mortgage approvals went up 19% between January and February

"I believe with all the fundamentals in place of a more liquid mortgage market and substantially lower prices .... the market will remain steady for the next 12 months and start to appreciate gradually in spring 2010."

First time buyers needing even bigger deposits to secure a mortgage might question the assessment of "more liquidity" in the market.

But, "there are some small signs that some credit conditions are easing," according to Sir Alan Budd, a former member of the Bank of England Monetary Policy Committee.

"Small" being the operative word.

As the banks are still trying to reduce the size of their balance sheets, he admits "there is very little evidence" of it.

So maybe roots of recovery is a better assessment than actual shoots.

'Unemployment will rise'

Who really knows whether some or none of these predictions prove correct.

What is clear is that, if there are green shoots, they are sprouting in an economic field that still needs lots of weeding.

And even if any actually bear fruit and we experience growth, there is one place you will struggle to find signs of recovery.

It can take six months before changes in the economy trickle into the jobs market.

So do not expect to see a drop in unemployment figures any time soon.

"Employment will continue to fall during the remainder of this year and into next," says John Philpott, Chief Economist at the Chartered Institute of Personnel and Development.

"I expect the jobs market to bottom out in the spring of 2010, with employment then starting to grow again in the autumn."

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