End of blues?

Increased retail sales and improved business confidence could signal the end of the recession, but experts warn recovery will be slow.

A survey by the Institute of Chartered Accountants of England and Wales has revealed that business confidence has moved to its highest level in two years, indicating that the UK economy will return to growth in the third quarter of 2009.

The ICAEW's Business Confidence Monitor (BCM) showed the Confidence Index standing at 4.8, up from -28.2 last quarter. This is the largest quarterly increase improvement since the BCM began, leading chief executive Michael Izza to pronounce, "The UK recession is at an end."

The high street has also seen a confidence boost, with retail sales rising twice as fast as expected in July. According to data from the Office for National Statistics (ONS), the volume of retail sales in July was 3.3% higher than in July 2008. Sales in food stores were up by 2% compared to the same period a year ago. James Knightley, economist at ING Financial Markets, said: "The gains in retail sales give us greater confidence that GDP will rise in the third quarter, meaning that the UK exits recession."

Even catering customers are showing signs of recovery. According to the latest CBI Service Sector Survey, business value and volumes in consumer services, including restaurants and hotels, fell slightly over the past three months, but at a slower rate than the previous three quarters.

Butchers could still face tough times ahead, however, with financial experts warning that recovery will be slow. "We should not lose sight of the reality that we are still in a very tough environment for business," said Izza. "Although positive growth in the autumn looks likely, the signs are that the next 12 months will be very much about building for the recovery."

CEBR chief executive Douglas McWilliams added: "The UK economy is still swamped with debt, earnings growth is weak and unemployment is rising, so the outlook for households is cautious."

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