Economic Analysis by Lloyds TSB

Judging by the improvement in recent business surveys, the UK recession appears to have ended in Q2. We expect Q3 to post modest growth, supported by a fading in the pace of de-stocking, the car scrappage scheme and continued monetary and fiscal stimulus.

Judging by the improvement in recent business surveys, the UK recession appears to have ended in Q2. We expect Q3 to post modest growth, supported by a fading in the pace of de-stocking, the car scrappage scheme and continued monetary and fiscal stimulus. Nevertheless, with the postive impetus from the stock cycle likely to ease, we doubt the resumption of growth will mark the start of a rapid recovery. The UK continues to face substantial challenges: private sector indebtedness remains close to record highs; credit constraints have eased, but not disappeared; unemployment is still rising; and public sector borrowing has soared.

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