VOLATILITY in the economy is masking the strength of the UK’s recovery from recession – especially in key sectors such as manufacturing, a leading economist has said.
Addressing the latest economic lunch organised by Yorkshire Bank Corporate and Structured Finance and TheBusinessDesk.com, Tom Vosa told an invited audience of business leaders from across the West Midlands recent events had made a new batch of statistics unreliable for predicting the health of the economy.
The latest West Midlands PMI shows that although growth still took place in May incoming new business was much lower than recently. The situation is highlighted by the region’s Business Activity Index falling 3.5 points from 57.5 in April to 54.
The figures are in line with the latest manufacturing output figures issued by the Office for National Statistics which show manufacturing output fell by 1.5% between March and April.
However, Mr Vosa, chief economist to Yorkshire Bank, told the lunch meeting, which was hosted by Ian Howey, area director, acquisition finance, drawing any meaningful conclusions from the data was difficult.
“The PMI survey has created loads of stories about how manufacturing is slowing. The survey was for May but it included Easter and the Royal Wedding when a lot of businesses were closed so it’s not a correct measure,” he said.
“The June data will show an upward bounce and so there we will be, back on the road to recovery.”
He said the picture had been further complicated because of the weakness of the construction sector.
“The last quarter of 2010 saw construction fall and the service sector decline as a result of so many meetings being cancelled. We had a strong bounce back in February and March with private demand strong but construction did nothing and so real GDP growth came up at 0.5%,” he said.
“The problem is that no one believes the construction data – not even the construction industry. Underlying economic activity is therefore very difficult to evaluate because housebuilders don’t recognise the weakness of the construction sector.
“My own suspicion is that the underlying economy is doing far better than the headline data suggests – it’s just the high inflation rate is distorting an otherwise successful economy.”
The event, hosted by the bank’s Corporate and Structured Finance team at its Birmingham offices, was attended by senior leaders from major businesses around the region.
Among those present were: David Grove, of Grove Industries, Mark Advani, of ISIS Equity Partners, Owen Trotter, of Key Capital Partners, Paul Franks, of Gresham, Phil Burns, of Clearwater Corporate Finance, Andy Currie, of Catalyst Corporate Finance, Richard Boot, former West Midlands chairman of the Institute of Directors and now of Active Human Capital, Stephen Craik, of KPMG, Steven Kentish, of PwC and investor Stephen Saltaire.
They were joined by Ian Mansell and Martin Poole, directors of acquisition finance, Yorkshire Bank.
The event was part of a series which began last October when Mr Vosa addressed a gathering of Yorkshire Bank clients and professional advisors just days before Chancellor George Osborne unveiled the government’s comprehensive spending review.
