Central banks warn on likely growth rates

Consumer demand, Economic growth, Financial Events, Leverage

Ben Bernanke.jpg

Coincidentally, both the US Federal Reserve and the Bank of England yesterday signalled the probable end of the ‘the recession’ yesterday. But as the blog noted last month, statistics don’t tell the whole story.

The issue is that economists usually define recession as simply being 2 or more quarters of negative growth. Automatically, therefore, any improvement – however small – marks the end of ‘the recession’. This is what both Ben Bernanke and Mervyn King are now signalling. Both, however, added important caveats to their comments:

Mervyn King.jpg

Bernanke noted that “even though from a technical perspective the recession is very likely over at this point, it’s still going to feel like a very weak economy for some time as many people will still find that their job security and their employment status is not what they wish it was.”
• Whilst King went further, noting “It is very important not to lose sight of the fact that growth rates don’t tell the story. It is the levels that really matter. The depth of the recession is great and it will continue even if we get a small positive growth rate over the next few quarters.”

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