UK Stable by October or Darling Using Positive Mental Attitude?

I have just been left slightly bamboozled by the Telegraph's analysis page detailing the run up to Alistair Darling's 2009 budget.

The most recent article on the left hand side is about Darling proclaiming that the UK will be over the worst of the recession in 6 months, and on the right hand side an article from last Wednesday headlining that British unemployment will hit 3.2million by 2010, from the British Chambers of Commerce.

It immediately struck me that Darling has been swept up in the positive news of late, and just a few days after he admitted his pre-budget report had been overly optimistic, Darling may well be dead set on putting his foot in it again.

The Telegraph report says that Darling's full forecast is set to include a return to growth at the turn of the year, and a fully fledged recovery well under way by the next General election. The latter is more than likely wishful thinking, because unless it becomes a reality it is unlikely Labour will be re-elected.

Apparently the consensus amongst city workers -- who have endured thinning ranks throughout the downturn -- is a similarly optimistic forecast. According to a poll by Reuters this week, half the analysts in the city think that the UK economy will have at least stabilised by Q4 of this year, with some stating growth will have resumed by then.

The BCC (British Chambers of Commerce) said last Tuesday that it thought unemployment will have reached 3.2million by the 3rd quarter of next year, as the manufacturing industry is expected to continue to suffer, and in spite of the fact that the services sector was showing signs of beginning to recover.

The British Chambers of Commerce has a massive wealth of data and statistics to work from, and would not be issuing such pessimistic statements unless it believed them to be true, after all such statements are not in its members best interests. The aim of the BCC report was of course to call for government action to prevent its predictions becoming reality.

It does indeed seem that Darling has been swept up in the green shoots mindset. Perhaps more worrying is that this is a widespread phenomenon, because reports today say that the government and Bank of England are now reluctant to expand quantitative easing, which was quite possibly the precursor for any green shoots we see.

The great irony will be: if it is the green shoots of recovery emerging that leads to their being killed off by the government's failure to continue efforts to boost recovery, most notably quantitative easing.