Exports offer hope as King avoids R word

"Don't mention the R word" was probably the edict from Downing Street as Bank of England Governor Mervyn King prepared to unleash his much-anticipated quarterly report on the state of the economy.And, for what it's worth, he didn't.

But Mr King did say everything but as he issued the most downbeat report on the UK's financial outlook since the Bank of England became independent over a decade ago.
The main headline from the report was the acknowledgement that there will be zero growth over the next year. But the forecast of broadly flat output would not be quite as straightforward as that: "It's bound to be the case that there is the possibility of a quarter or two of negative growth."
Which will ring a bell for those who have studied the definition of the R word recently. It amounted to an acknowledgement that Britain could well be in recession by the end of the year.
All of which is bad news for the beleagured chancellor, of course. Alistair Darling has enough problems just now, but the volte-face he will soon be forced to perform surrounding his economic forecasts are all of his own making.
It is only six months since he predicted the UK economy would grow by 2% this year and 2.5% in 2009. These were derided as foolishly optimstic at the time. That now looks generous - he will be forced to admit as much come his pre-Budget Report in the autumn.
So, is there anything positive we can take from today's report from the Bank? Well, there is the prediction that the slump will be short and sharp, with a recovery predicted sooner than widely expected and annual growth of 3% per annum returning by 2011.
Moreover, the tone of the report - which has significant input from the Monetary Policy Committee - also suggests that a rate rise is not so likely. Expect the 5% figure to remain for some time to come.
And in the North East we should probably also take heart from the ongoing upbeat prediction regarding the contribution made by exports. These will provide positive growth which will help to offset the less rosey picture domestically, says the rport. Our manufacturing companies, who have an impressive record of growing sales overseas in recent years, are well-placed to benefit from this.

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