South takes advantage of economic recovery

From the Echo, first published Wednesday 15th Oct 2003.

COMPANIES across the South are creating more jobs as the economic recovery takes hold, even though margins "are still being squeezed".

"Now is the time to give growth a chance," Royal Bank of Scotland group chief economist Jeremy Peat told business leaders.

"This is a benign and stable environment, one that we can all do good business in."

Interest rates are expected to remain on hold at 3.5 per cent until May 2004.

"I'm getting more optimistic, increasingly confident that we are going to get through this difficult period," Mr Peat told business leaders at Bournemouth's Hermitage Hotel.

"The global weaknesses have not impacted on you (the Bournemouth area) too badly for which you should be grateful."

UK GDP growth is 1.8 per cent for 2003 - growth in consumer spending of 1.8 per cent and public sector investment of 1.0 per cent have offset declining business investment (-0.2 per cent) and net trade (-0.7 per cent).

UK GDP growth is forecast at around 2.5 per cent in 2004 and 2005.

House prices were in for a soft landing with growth settling down to 10 per cent by the end of the year and 2.0 to 5.0 per cent by the end of 2004, said Mr Peat.

Britain's consumer-driven economy now needed "reacceleration and rebalancing...that is the key to getting into clear blue economic water next year."

Vital to recovery was America - the only major engine of world growth at present with the eurozone "a limp laggard, weakness personified" and Japan "mired in deflation."

But in the US there was still a "disconnect" between bullish analysts' data and companies' reticence to invest, said Mr Peat who was in New England last month.

"It worries me that a lot of the (US) growth of the last few quarters has been artificial - what the IMF describes as `the best recovery that money can buy'."

US GDP growth has not been underpinned by a rise in employment: "This US activity - which is so critical - is not yet underway and cannot be guaranteed."

The eurozone would still be a tough market for exporters because European firms were having trouble competing overseas, thus fuelling domestic competition there.

Archive Home