Is the economy climbing out of the deep or is the nosedive changing into an emergency landing? Recovery, levelling-off recession or stabilising fall? Analysts and economists are coming up with contradictory conclusions and ideas. Meanwhile, the price of shares on the stock market is going up again.

Trying to identify the bottom of the recession brings to mind a couple of swimmers in rough sea. One is suddenly able to touch the ground in between two big waves, while the other feels that, if he’s hit by one more breaker, he’ll drown.

Economic indicators in the United States are showing an increase again. Some US banks are turning a profit and Wall Street has been in the plus for days in a row. China’s economy grew by nearly eight percent in the second quarter. In the Eurozone, however, industrial orders fell, the United Kingdom had a record budget deficit and unemployment increased rapidly throughout Europe as a whole.

Purse strings
Is the end of the recession in sight, or is the revival to be short-lived? Many companies have used up their stocks and this should lead to production getting underway again. Anke Struys, a Rabobank economist, warns that this will not last long if the consumer keeps the purse strings closed.

“This is especially true of the Netherlands, where we don’t expect the momentum to come from the consumer. This view is backed up by the projected increase in unemployment in the second half of this year, maybe going on into next year. (The question is: where will the momentum come from?)”

Peter de Bruin from Fortis Bank Netherlands is more optimistic:

“We’re not just seeing recovery in America but throughout the world. The recovery is such that it cannot simply be explained by the need to restock. Europe is lagging behind a little, but we expect that Europe too will show positive growth in the third quarter.”

His colleague at Rabobank is more cautious on this point as well. She expects the Dutch economy to come out of the doldrums as late as the second half of 2010. She puts the fact that Dutch unemployment is not dramatically high down to government policy.

“The government is trying to keep unemployment down. The introduction of part-time unemployment benefit has helped do this during the first half of this year.”

Unemployment set to double
The government has introduced a scheme allowing companies to put staff on shorter working weeks with the shortfall in pay covered by unemployment benefit. Ms Struys explains, however, that if the recession continues, these workers will eventually join the jobless and unemployment will increase rapidly.

Another point is that employers do not sack staff immediately they hit economic difficulties: that only happens later. This fact has led Statistics Netherlands (CBS) to say that Dutch unemployment is set to double in 2010.

The growth of the Chinese economy will also do little to help countries such as the Netherlands. The Dutch economy is far more dependent on neighbouring Germany. Although its central bank says the German economic downturn slowed after the first quarter, this does not mean recovery has begun. What is more, investor confidence in Germany actually fell just recently.

The odd swallow
With unemployment on the rise throughout Europe and banks still for the most part refusing to give credit, it remains unclear what will give the economy a kickstart. The odd swallow in China or the US – no matter how important – does not make a European summer.

Doom mongers are now pointing to Mexican flu. The forecast is that, if the disease hits the UK hard, it could cause an extra three percent recession.

And, there’s bad news for those who have just decided to drown their sorrows in the pub: every day, it’s closing time for good at five British pubs. However, that’s not down to the crisis but because of the smoking ban and the high cost of beer.

(Photo: ANP)