BRITAIN is on the brink of a lasting recovery, according to the Organisation for Economic Co-operation and Development (OECD), as momentum builds in the global economy.
The international think-tank said the UK was at a “potential turning point” and declared that the world’s leading economies had “regained momentum” in its most upbeat assessment of the UK’s prospects for months.
The findings were made in the OECD’s composite leading indicators (CLIs), which have a strong track record of predicting the economic outlook six months in advance.
The OECD made the judgement on the UK because the CLIs have indicated a pick-up in activity for two successive months – in January and February. However, it suggested that the recovery may be fragile as February’s improvement in activity was “weaker than in last month’s assessment”.
The UK also remains below the long-term trend level of growth, measured as 100, which indicates a proper rebound. The UK CLI for February was 99.5. The finding follows data from the Office for National Statistics which revealed that the economy was smaller at the end of December 2011 than in June 2010, shortly after the Coalition took power.
The OECD recently dealt the British Government a damaging blow by predicting that the economy had shrunk in the first three months of the year by 0.1pc – following the 0.3pc decline in the final quarter of 2011.
A contraction would have plunged the UK back into a technical recession. Most economists now disagree with the OECD, though, and believe the UK grew in the three months to March. The OECD’s two findings are not contradictory because the CLIs are forward looking indicators.
It said that the indicators “continued to point to a positive change in momentum” internationally, with the broad OECD-area indicators above 100 for a fourth consecutive month.
It also found that the euro area was at a “potential turning point but with diverging assessments for the four major economies”. Italy and France are still struggling with “sluggish economic activity”, it found, but Germany – like the UK – was showing evidence of a “positive change in momentum”.