Recession is officially over: Surge in national output figures will confirm that economic recovery is under way

BRITAIN'S economic recovery will officially be declared under way tomorrow. Official figures for national output between January and March will show their first unambiguous rise for two-and-a-half years, ending the longest recession since the Second World War.

For the first time since the recession began, Britain's onshore output is expected to surge by 0.6 per cent in the first quarter of this year, confirming the recent evidence of recovery from falling unemployment, soaring manufacturing production, rising exports and high-street spending, and buoyant business and consumer confidence surveys.

The usual definition of recessions is that they begin with two consecutive quarters of declining output (gross domestic product) and end when output begins to rise. On this basis, tomorrow's figures will unequivocally show a formal end to the recession.

In addition the CSO is likely to revise upwards its growth figures for last year which may show that the recovery began earlier than expected. Norman Lamont, the Chancellor said yesterday that all the signs so far had been encouraging. 'It has been difficult to find an indicator that has gone the wrong way. There is a recovery in retail sales, in manufacturing, in motor sales. These are facts, they are not imagined happenings.'

The Confederation of British Industry's quarterly industrial trends survey on Tuesday will continue the run of upbeat indicators that have convinced the City recovery is gathering pace. This may give the pound impetus to break through DM2.50, having risen to a three-month high of DM2.4936 last week on recovery hopes.

Most City forecasters will once again be surprised by the strength of the economy. City economists expected, on average, a rise of 0.4 per cent in national output in the first quarter of the year, double the increase in the previous quarter.

This week's bullish news follows last week's figures showing that retail sales and exports to non-EC countries both surged more than expected, while there was also another surprise fall in unemployment for the second month in succession.

The 26,000 decline in the jobless total for March came as a particular jolt to the City, as economists had almost universally dismissed February's fall as a freak. But most analysts doubt that the falls can be maintained.

Some clues as to the future prospects for unemployment may emerge in the CBI survey. Dun & Bradstreet, the business information group, reported last week that the number of employers expecting to take on workers had recovered unusually sharply.

Unemployment normally continues to rise well after the recovery in national output gets under way.

A fall so early in a nascent recovery is unprecedented in the post-war period and has caused considerable confusion among official and business economists. But there are a number of reasons why the jobless total may be turning down unusually early this time.

The first possibility is that the economy has already been growing more strongly and for longer than the official figures have shown.

Earlier this year, the Central Statistical Office revised upwards its estimates of national output in the second half of last year, and is expected to do so again tomorrow.

However, even a stronger and earlier rise in output is not enough to explain the falls in unemployment. In addition, there may be changes in the way the British labour market is behaving. Firms may feel that they shed too many jobs in the autumn and winter last year, as the promised post-election recovery failed to materialise and confidence was battered by the vain struggle to keep sterling in the exchange rate mechanism. It is now easier to fire people if they have not worked for a company for more than two years, so there is less risk in employers hiring them.

The workforce has been shrinking during the recession; people continue to retire but there are far fewer school-leavers seeking work. There are many fewer 16-year-olds now than there were in 1980, the time of the last recession, because the post-war baby boom has now passed fully into the labour force. In addition, there appears to have been a surge in the number of 16-year-olds deciding to stay on in full-time education.

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