Official verdict on end to recession due this week

Oct 19 2009 By The Journal

OFFICIAL confirmation that the recession has ended is likely this week, but investors will also be looking for possible twists in the Cadbury takeover saga and updates from retailers including Debenhams.

Friday’s eagerly-awaited figures on national output between July and September will reveal whether the UK’s recession is finally at an end.

The economy has not grown since the first quarter of 2008, but commentators are hopeful for a modest expansion in the third quarter as the UK pulls out of its headlong dive.

Consensus forecasts have pencilled in a 0.2% rise for July to September in the Office for National Statistics’ first estimate of output.

But if the economy shows a further shock decline or even stagnation, it will be the first time in ONS records stretching back to 1955 that the UK economy has failed to register growth for six quarters in a row.

Weaker than expected industrial production figures showing a shock decline in August cast doubt over the strength of the third quarter.

While confidence among manufacturers and services firms is at its highest point since the start of 2008, several key indicators on domestic and foreign sales remain negative.

Retail sales volume figures for September due on Thursday are also expected to grow 0.4% as shoppers buy now to avoid January’s VAT rise.

Public borrowing was the main battleground for the political parties during the conference season and Tuesday’s figures on the dire state of the finances should show the scale of the task ahead whoever wins the general election.

A pay freeze for 80% of the public sector and longer working hours await under Shadow Chancellor George Osborne to help cut the deficit, while the Prime Minister unveiled asset sales worth £16bn to improve the state of the finances.

How much of a dent this will make when the Government is set to borrow a record £175bn this year remains to be seen.

Dairy Milk maker Cadbury was thrust into the bid spotlight last month with its rejection of a £10.2bn takeover approach from US food giant Kraft.

The approach bumped up the firm’s share price by more than a third with investors banking on a better offer to seal the deal – or the prospect of a takeover battle with rival interest from the likes of Hershey.

Kraft has until November 9 to make a firm offer for Cadbury or withdraw under a put-up-or-shut-up deadline imposed by the Takeover Panel.

Speculation over the next stage in the saga is likely to completely overshadow Wednesday’s trading update – although after snubbing Kraft’s "low- growth" model, Cadbury is under pressure to prove to its investors the value of remaining independent.

Department store chain Debenhams should post a 12% rise in annual profits on Thursday after riding out a brutal year on the high street.

Consensus forecasts put the group’s pre-tax profits at almost £123m, helped by market share gains and better stock controls.

The profit rise is expected despite the disruption caused by its conversion of large areas of its outlets from concessions to an increased number of own-brand ranges.