Is the famous green shoots really about to shoot?..........

From The Sunday Times -- June 7, 2009

Is this the turning point?

The green shoots of an economic recovery are starting to appear, but the business world is still anxiously awaiting an upturnDavid Smith: Economics Editor
Most people walking past a former pub in Henley-o -Thames, Oxfordshire, do not realise they are close to one of the nerve centres of the global economy.

In what used to be the Jolly Waterman, a Brakspears pub, a team of 50 economists and researchers is employed by Markit, the financial and economic research company, to compile and analyse survey data from around the world.

Purchasing managers surveys, measuring business-to-business activity, monitor the global economys heartbeat.

After the convulsions of last autumn, when the worlds banking system came close to meltdown, signs of recovery in the Markit surveys began to come through first in emerging economies, notably China, India, Turkey and Brazil.

Last week, however, they were joined convincingly by Britain. The strongest evidence that the economy may be close to the end of recession came with the monthly purchasing managers index (PMI) for Britains services sector.

The PMIs measure business-to-business activity in manufacturing, construction and services. All three sectors have improved in recent months, but last month the PMI for services jumped from 48.7 to 51.7, rising above the key 50 level that marks the divide between expansion and contraction.

Business expectations were at their highest since October 2007, before the credit crisiss real impact, while new business recorded its highest reading since March last year.

The jump in the service-sector PMI pushed the composite measure, which also takes in manufacturing and construction, to 50.4 rising into expansionary territory for the first time since March 2008.

Chris Williamson, chief economist at Markit, which produces the surveys for the Chartered Institute of Purchasing & Supply, said that, while only services had so far returned to growth, a broad-based turning point had been passed.

Other countries were showing rising PMIs, but Britain was ahead of the pack. The rise in the UK index is notable because comparable indexes for other European countries remain firmly mired in contraction territory, he said.

While cautioning that the relationship between the PMI and official gross domestic product (GDP) figures had been less precise than usual since last autumn, a return to GDP growth was possible as early as this quarter, a year after the economy went into recession.

The PMI surveys present a significant upside risk to the prevailing consensus forecasts, said Williamson.

Many economists agreed. This was a bona fide green shoot, said Simon Hayes, an economist at Barclays Capital. If this positive momentum continues, the economic contraction may end within the next few months, several months ahead of our prior forecast and in startling defiance of the more bearish commentators, such as the International Monetary Fund (IMF), which had been expecting the recession to continue into 2010.

It has cut its forecast of Britains GDP decline this year from 4.2% to 3.5% and now sees recession ending this summer.

Malcolm Barr, an economist at JP Morgan, was more bullish than the consensus before the PMI data and is now convinced that the recession is to all intents and purposes over.

If you were to put me on a desert island and ask me to name one number it would be the PMI, he said. When we talk about the day the economy went back above zero it will be the May data that did it.

I understand that for many people and businesses the transition from the economy falling to the economy stabilising is not a sudden transition to a happy place. Were still in the woods, but were out of the darkest place in the forest.

George Buckley, UK economist at Deutsche Bank, revised his forecasts up on Friday and said the question was not whether there would be a recovery, but its sustainability.

We are bringing forward the timing of the first positive quarter of GDP growth by six months, he said. But the authorities should not take recovery for granted, and it will be important to keep the current stimulus in place for some time until economic growth gains considerable traction. THE purchasing managers surveys were not the only figures last week to suggest the economy may be coming through the worst. House prices have been falling since the autumn of 2007, according to Halifax, with only occasional breaks in the decline.

Prices bounced back 2.6% last month, Halifax said, but it cautioned that it was too early to say a turning point had been reached. Nationwide building society also reported a rise in prices, of 1.2%, in May.

Analysts said further price falls were likely in the coming months, but at a slower pace. Housing activity, measured by mortgage approvals and interest among buyers, has been on the up for some months.

Despite being in the market more than 27 years, Im finding this years trading very surprising, said Martin Bowen-Ashwin of Chesterton Humberts, the estate agent, commenting on property in southwest England. Viewings, offers and sales agreed have significantly improved. Year-on-year turnover for the first five months of trading is up by over 30%.

The beleaguered construction industry, one of the hardest hit by the credit crunch, with output plunging 9% in the first quarter alone enough to trigger a possible downward revision in the GDP figures is also showing modest evidence of stabilisation, after the sharpest downturn in decades.

There are the flickering signs of life in residential and commercial-property markets, said Simon Rubinsohn, an economist with the Royal Institution of Chartered Surveyors.

Hard data recently showed a very modest rise in housing starts. In addition, the acceleration in public-spending capital programmes should increasingly help to provide support for the construction industry.

One of the most striking developments in recent months has been the collapse in manufacturing, not just in Britain but around the world. The dive in world trade had an immediate impact on factories, as firms slashed output and ran down inventories. Even for manufacturing, however, the news has been getting better.

The shock that we had from the autumn through to the spring led to a pace of decline that was quite startling, said Mark Swift of the Engineering Employers Federation. Things have started to stabilise and we expect some pickup before the end of the year, but any recovery is likely to be anaemic. THAT is the view from the factory floor and is typical of the view in business more generally. Analysts acknowledge that there is a difference between an economists recovery, visible deep in the data, and a genuine business upturn. The board-room view is mainly that the latter is still some way off.

I dont have a crystal ball, but during the last recession at each point when it seemed it could not get any worse, it did, said David Page, chairman of Clapham House Group, the restaurant operator, and former boss of Pizza Express.

I think people are whistling in the dark to keep up spirits when they talk of green shoots. We opened 23 sites in 2007 and well open two this year, so that tells you what we think.

Tim Martin, founder and chairman of JD Wetherspoon, the pub group, said: You can only think that the recession is over if you are looking one inch in front of your nose in a deep fog.

You cant ignore the big picture. Its like saying to your bank manager: ignore the fact that I am hopelessly overdrawn, look at my sales figures for yesterday, they werent as bad as three months ago.

With increasing numbers of people staying at home this summer because of the recession, the travel trade has been hit hard. One leading figure said it was too soon to talk of the end of recession.

It is too early to tell if the recession has bottomed out, said Manny Fontenla-Novoa, group chief executive of Thomas Cook. A full recovery is sure to take some time, and the final sign will be when unemployment stops rising.

On this, the Chartered Institute of Personnel and Development (CIPD) warns that even if the economy is showing signs of bottoming, the job market will deteriorate for some time.

We shouldnt get carried away by talk of green shoots when it comes to employment prospects, said Gerwyn Davies, CIPD public-policy adviser.

The jobs market may be contracting at a slower pace, but it is continuing to contract all the same, with unemployment of more than 3m on the way as we head toward 2010.

Keith Ludeman, chief executive of Go Ahead, the quoted bus, rail and airport ground-handling group, is well-placed to assess where the economy is. Different parts of the business are at different points in the cycle, he said. In air cargo, its down 30% and there are some signs that its hit the bottom. On air passengers, we are not at the bottom airlines are still cutting back their schedules for the summer, which has a knock-on effect on us. On bus- es, ridership is still growing, but largely in concessionary fares. On rail, growth has slowed right down.

Not everybody is downbeat. Aidan Connolly, chief executive of Sodexo UK and Ireland, the food services and facilities management firm, said: We have been less affected than others as our clients look to outsource to find cost efficiencies in their operations. While early days, there are indications that we are over the worst of it and we are cautiously optimistic that things are improving.

Henry Engelhardt, chief executive of Admiral, the car insurance specialist, said his firm had benefited from being fairly recession-proof. Were fortunate as we havent seen anything of the recession, he said. Car insurance is a compulsory purchase, which means consumers arent deciding whether to buy it, theyre just asking who from?

In the first quarter we continued our strong growth, increasing customers more than 15%. On the employee side we continue to recruit. We are all still having lots of fun as well as working hard.

Peter Harmer, chief executive of Aon, the insurer, said the question was whether the recent improvement in confidence could be maintained. If the consumer thinks the recession is over, then it is. It seems now to hinge on confidence.

Those whose job it is to read economic trends say business should be grateful for the signs of optimism that are out there.

David Yarrow, founder of Clareville Capital, the hedge fund, said: If you had asked FTSE 100 chief executives at the end of September where they expected us to be at the start of June, I think they would be pleasantly surprised with how robust it is with the exception of commercial property.

The key has been the strength of emerging markets such as Brazil and China. The economy is not out of the woods but it is better than people thought and there is much less uncertainty than before.

And that, given where the economy was a few weeks ago, is encouraging. The global economy has not hit bottom yet, but the worst of the slow- down is over, said John Lipsky of the IMF on Friday. Figures in America showed nonfarm employment dropped 345,000, below the 500,000 expected.

Is the recession over? Not quite. But the evidence is that it could soon be. Additonal reporting by Matthew Goodman

WHAT SOME OF THE COUNTRYS BUSINESS LEADERS SAY . . .

During the last recession, at each point when it seemed it couldnt get worse, it did David Page, chairman of Clapham House Group

You can only think its over if you are looking one inch from your nose in a deep fog Tim Martin, chairman of JD Wetherspoon

The indications are we are over the worst of it. Were cautiously optimistic Aiden Connelly, chief executive of Sodexo UK and Ireland

We continue to recruit and are still having lots of fun as well as working hard Henry Engelhardt, chief executive of Admiral insurance

If consumers think its over, then it is. It seems now to hinge on confidence Peter Harmer, chief executive of Aon

The economy is not out of the woods, but there is much less uncertainty than before David Yarrow, founder of Clareville Capital

Staggering that Hornby is being considered for a board post... I wouldn't employ him to flip burgers

its a national disgrace!! the guy should be in jail......still biying huge amount of propewrty last year when no-one was buying.....its as if he did it on purpose to bankrupt hbos

looks like another week of battering for the banks - but this seems the worst hit on every scrap of news released, if its bad news on the 'take up offer' could be a good buying opportunity at the 40 - 50p mark. Still be a long haul upwards though.

87% take up of shares.

Good take up from the open offer..............the shares down with the market at the moment FTSE 60 points on the red ........

UPDATE: Lloyds Banking Rights Issue 87% Subscribed

Lloyds Banking Group PLC (LYG) said Monday that shareholders took up 87% of its GBP4 billion rights issue being used to redeem government-held preference shares in a move aimed at cutting financing costs and freeing the bank to pay dividends.

It said the advisers managing the offer will try to place the 13% of remaining shares in the market. As long as the offer is fully taken up by shareholders the government's stake in the bank will for the time being stay at 43.5%.

Lloyds shareholders on Friday voted overwhelmingly in favor of replacing the government-held preference shares with ordinary shares.

The Times reported Monday that Lloyds is expected to repay about GBP2.3 billion to the U.K. Government this week, becoming the first lender in Europe to return bailout money to the taxpayer.

Replacing its preference shares will save the bank GBP480 million in annual interest to the government and would allow it to pay dividends. Conditions attached to the government-held shares prevented it from paying dividends until all of the shares had been redeemed.

Chairman Victor Blank said Friday he was confident the rights issue would be well subscribed as Lloyds shares had traded well above the 38.43 pence issue price of the new shares.

The shares fell in early trading Monday. At 0710 GMT, they were down 2 pence, or 2.9% at 64 pence. They have fallen 36% since the start of the year and are down 76% over the last 12 months.

Deutsche Bank upgraded the stock Monday to buy from sell, lifting its target price to 100 pence from 35 pence. It said the shares present a value opportunity even though there was a risk they would underperform in the short term because of pressure on margins and loan losses in the first half earnings.

The preference shares were issued in connection with a total GBP17 billion capital increase by HBOS and Lloyds TSB before they merged in January, which resulted in the government taking a 43.5% stake in the combined group.

Since the merger, amid a steep increase in impairments stemming in large part from HBOS' commercial loans portfolio, Lloyds has joined the government's asset protection scheme to protect itself from further losses on troubled or risky assets.

Lloyds has insured assets valued at GBP250 billion, of which 83% were identified as former HBOS loans.

Lloyds is paying a GBP15.6 billion fee for the scheme, and must also cover first losses up to GBP25 billion, after which the insurance kicks in and the government will bear 90% of further losses.

The bank said in early May that it has already incurred impairments that are covered by the scheme.

To finance the fee as well as the first loss, Lloyds is planning to issue B-shares that carry a fixed dividend to the government, which could take its stake to 62% if converted to ordinary shares

Presure on the shares as the rest of unsold shares at the placing, are looking for a HOME,
at the same time the day is not right as the FTSE is well down

...................... Intraday Chart ........................................................................... 7 days

On the other hand ..........

Lloyds upgraded to buy from sell at Deutsche Bank

Deutsche Bank upgraded Lloyds Banking Group (UK:LLOY 66.20) to buy from sell, saying that, with the question of solvency mostly dealt with, Lloyds looks cheap based on likely post-crisis earnings.

In the short-term, Deutsche Bank said it expects the bank to post extremely weak first half earnings, due to sharply lower interest margins and elevated loan losses.

Deutsche Bank also said there are significant regulatory risks remaining, since the EU is yet to sign off on government capital injections and is likely to impose some limits on the bank's activities or possibly require asset sales.

even this not doing them any favors - down nearly 8% , thats not market sentiment mate, thats something somebody knows - but not us.

with 30% more Buys than sells today and now down 10 % - something is afoot, I wouldn't be surprised if we saw another Bradford and Bingley, Northern Rock escapade here. You'll end up without a penny if your not careful - Let Deutsche Bank buy em ! They'd have bigger balls than me if they did.

Don't say I didn't warn you!

Just read the RNS that was released at 2.08pm - They've found placings at 60p for last 13% of the offer - Bet that makes you all feel happy !! What a con, I wondered who was offered the shares at that price when they opened at 66.5p
Hopefully it will stabilize around the 60p mark - if not I'd hate to think where it will drop too.

re - They've found placings at 60p for last 13% of the offer

It was just market manipulation to bring down the shares to the point were Institutions were ready to buy the shares

Think sour grapes comes to mind for nord, and hlyeo98 who didn't take up the offer and would rather spend their time spreading doom and gloom.
Barcs 284p doom and gloom said 250 and below......
Lloyds 61 and holding, doom and gloom said 30 and below.......
Suckers.

Ask Hyleo how his RBS shares are doing, hardly an expert in anything ;)

hyleo had yell sub 20p and almost doubled......had smdr At 70p or less and almost 2 quid......the list goes on.

hyleo is an expert in nothing! with no info either......i reckon he is a 15 year old with free lessons and reckons he's a young buffett in the making.

what did muppet hyleo say about rbs? just want to know to add to the collection of his clangers

Lloyds closing all C&G branches

A good day for the banks and LLOY is doing better than any today

From another LLOY thread, wonder if it can be applied to someone "hated" over here ........

s......... - 9 Jun'09 - 10:49 - 77808 of 77817
E.....th
Poor unbringing, clearly lives in a council house full of rats.