In the garden the weeds and the green shoots seem pretty evenly spaced.

Here is one green shoot. UK industrial production rose by the highest level in 25 years in July. Here is the weed: in August it fell back, and despite the previous month’s rise, year on year industrial production in August was 1.1 per cent below the level from the year before. So far then, the weeds seem to be strangling all those budding flowers.

The Centre of Economics and Business Research (CEBR) predicted that next year inflation will fall below the rate of increase in average wages, leading to us all feeling better off, and so the economy should expand. In a similar vein, the latest report from the Ernst and Young Item Club has forecast falling inflation and rising house prices. Here is its chief economist Peter Spencer: “Inflation is coming back to heel, private sector employment is holding up, and the housing market also looks poised for a revival.” The Item Club reckons the economy will contract 0.2 per cent this year, grow by 1.2 per cent in 2013, and by 2014 in 2014. Yet, this leaves one question.  Why is it that ever since the UK fell into recession in 2008, economists have been predicting that the year after next will be better, and growth will be back to normal?

The National Institute of Economics and Social Research (NIESR) has been spotting weeds and green shoots. Last week it said that, according to its calculations, the UK expanded by 0.8 per cent in the three months to September. “The most robust rate of growth since the three months to July 2010,” it said.

But then it added: “Stripping out the effects of special events (the reversal of the negative effect from the additional bank holiday in June 2011 and the allocation of Olympics ticket sales from last year) suggest underlying growth is closer to 0.2 to 0.3 per cent per quarter.”

But back to greenery, the employment stats are good; 236,000 new jobs were created in the three months to July. Later this week we will see the data for the three months to August, but will this confirm green shoots, or point to weeds? Cynics say that in any case, much of the recent rise was down to a jump in the number of part-time workers.

And finally, there are the PMIs, or purchasing managers’ indices, as they are also called. The latest composite figures, combining manufacturing, construction and services fell in September to a level consistent with growth of just 0.1 per cent.

What is worrying, however, is that earlier this year the PMIs suggested mild growth, but the official data said recession. Since then the PMIs have got worse.

The PMI tracking employment fell to a ten month low in September.

Strictly speaking, of course, weeds grow from green shoots. But the fact is, right now evidence of a recovery seems to be based on optimistic projections rather than hard data.

©2012 Investment and Business News.

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