Inflation Report May 2009: Are the green shoots of economic recovery "withering" already?

Before things start to look too depressing, though, it should be noted that in the Bank of England's view, the outlook for the UK is by no means uniformly negative. The Bank of England points to "promising signs, both in the United Kingdom and globally, that the pace of decline had begun to moderate."

Yet neither is the outlook uniformly positive. Rather, a picture of uncertainty emerges. The report states:

Over the forecast period, [the financial stimulus measures] should lead to a recovery in economic growth, but the timing and strength of that recovery is highly uncertain.

This uncertainty is reflected in the report's refusal to make a specific forecast on growth (or otherwise) in gross domestic product (GDP) - the key measure of economic growth - over the period to the end of 2012.

Much hinges on the success or otherwise of the Bank of England's programme of quantitative easing, as well as a host of other factors. The report summarises these as follows:

The pace of the recovery may be slowed by a number of factors: the contraction in world demand and trade may be protracted; households may save more; and the availability of credit to companies and households may improve only gradually.

However, there is more certainty with regard to unemployment (which continues to rise, hitting 7.1% over the three months to March 2009 (subscription required), according to latest official headline data). It states that:

The labour market has loosened significantly over the past year. The vacancy to unemployment ratio - a summary indicator of labour market tightness - has fallen, and companies report that recruitment difficulties have eased. Further loosening in the labour market is likely, although some of the reduction in employment could be offset by a moderation in potential labour supply growth.

So, all in all, an uncertain report for uncertain times. But there might still be some hope for those green shoots yet...