First light.

Byline: Dennis Turner

First light

Just as the night is darkest before dawn, improving economic indicators are brightening the gloomy mood

For six months or more, the news on the economy has been unremittingly bad. The 1.9% fall in GDP in the first quarter of 2009 followed a drop of 1.6% in the last quarter of 2008. News from the job market seems to worsen by the day, while export opportunities are constrained by the worst year for the world economy since 1945. Without doubt, the UK is heading for its largest fall in output in any calendar year post-World War II. And, as Chancellor Alistair Darling's Budget made very clear, the cost to the Exchequer (and us) of trying to kickstart activity and rescue the banking system will be felt for years to come.

And yet there has been a subtle, almost imperceptible change in much of the commentary on current trends. Until recently, much of the bad news was expected and already factored into media and policymakers' opinions. Now, some positive, or at least less negative, news is emerging and while nobody should be rash enough to call them green shoots, it is probably fair to say there are some straws in the wind -- hinting the worst may be behind us. Even the stock market seems to think the low point has been reached.

As at any turning point in the cycle, the signals are mixed and now the first good news in months is jostling with the bad stuff for column inches. The housing market was the first part of the economy to feel the squeeze and has been in the doldrums for more than a year. In the early months of this year, though, it started to show signs of life. Mortgage approvals in February and March rose to their highest for nine months, albeit from a very low base. The Nationwide House Price Index recorded its first increase for 18 months in March (although along with the Halifax measure, it dipped a little in April) and several housebuilders reported higher viewing figures in the past few months.

It also appears that households are at last trying to deal with the huge debt burden. Following the massive reduction in interest rates over the past six months, there was a net repayment of [pounds sterling]245m of consumer credit, the first net repayment since the series started in April 1993. Additionally, in Q4 2008, homeowners used their own funds (to the tune of [pounds sterling]8bn) to complement borrowing to add to their housing investment, the biggest net injection into the housing market since records began in 1970. Even so, retail sales data is still in positive territory and responses to the surveys ...