Thursday, October 25, 2012

The 1% increase in GDP achieved in the third quarter of this year represents tremendously welcome news. Part of this increase is surely due to the effect of the Olympics, part to the subdued second quarter (with its glut of public holidays), and it is possible that part could be wiped away as more information comes in and revisions are made to the statistics. Nonetheless, it is difficult to perceive this as anything but an encouraging result. The return to growth has come a little earlier than many (myself included) expected. It does contribute towards an explanation of the encouraging employment figures that were released last week.

There remain uncertainties in the economic environment that suggest that the celebrations need to be tinged with some caution. But Mario Draghi's announcement of the European Central Bank's new stance has been helpful, and interest rate spreads in Spain, Italy and Portugal have fallen markedly - and stayed down. They are still too high for comfort, but the position is markedly more encouraging than it was just 6 weeks ago.