What sort of Recovery ?

According to the monthly assessment by the Chartered Institute of Purchasing and Supply (CIPS) / Markit the Purchasing Managers Index (PMI) rose in July to its highest level in two and a half years.

The PMI is made up of various measures of industrial performance; orders, output, employment, stock levels and inflationary pressure.  CIPS / Markit said orders and output were growing at their fastest pace since the summer of 1994, a period when the UK was recovering from the last recession.  But costs like fuel have also risen.

Where is the demand coming from ?

Much of the demand is domestic and funded by borrowing, much of the rest is from those parts of Europe that are emerging from recession.  How secure that recovery is, is surely uncertain while many Eurozone member state economies remain in recession and issues demand to be addressed in the stronger economies; many Netherlands’ homeowners have been plunged into negative equity, more Germans are becoming intolerant of the low pay that has helped make and keep Germany competitive.

The export led recovery to the BRICs has not happened:

• China seems to have achieved a soft landing economically rather than a catastrophic bursting of its property bubble and industrial output rose again in August
• India’s economy is faltering and Indians are dealing with sudden and significant inflation
• Brazilians are restive wanting the benefits of economic progress more evenly distributed among the population
• Russia is unusual, not truly one of the rising economies, nor one of the original G7 industrial economies, with an economy based primarily on exploiting vast natural resources rather than industry
• The other rising economies have yet to achieve global significance 

Most employment growth appears to be in the service sector and much of that growth appears to have been in the form of insecure zero hours, part time or temporary employment.  This is probably more indicative of uncertainty about the economy and recovery and insecurity on the part of employers rather than any ‘capitalist vindictiveness’,  though some no doubt will see it in those terms.

So far the 'recovery' is neither strong nor certain and it may take years for recovery in the economy to translate into recovery in the labour market.