After having exited recession only recently, the UK is now ‘on the road to recovery’ – a different story entirely to the one in the US, where the recession ‘unofficially’ ended in the third quarter of last year.

So, with both economies returning to growth, it’s time to take a look back and pick out what actually happened… was the recession in the UK that different to the recession in the US?

Well, to start off with, the US was only in recession for four consecutive quarters (12 months) – which is better than Britain, which remained in recession for a further two consecutive quarters (so 18 months in total), meaning the UK economy was the last major economy to come out of recession (behind Japan, China, France and Germany).

It all started for the US economy when economic growth fell by 0.3% during the third quarter of 2008 – after increasing by 2.8% during the previous three-month period. While for the UK, the economic heartache began when gross domestic product (GDP) fell by 1.5% during the final quarter of 2008. 

Fast forward several quarters of economic uncertainty, and…

In the third quarter of 2009, the US economy posted a better-than-expected annualized growth rate of 3.5% – marking the first positive quarter since Q2 2008. Meanwhile, in the final quarter of 2009, the UK economy posted a weaker-than-expected growth of 0.1% – barely making it out of recession.

Despite the weak economic growth in the UK, Chancellor of the Exchequer Alistair Darling said he was confident that the UK is now “on a path to recovery”.

Over the course of 2009, residents of both countries felt the effects of the recession. In the UK, for example, the number of people declared insolvent reached an eye-watering 134,142 – this was made up of 74,670 bankruptcies, 47,641 IVAs (Individual Voluntary Arrangements)* and 11,831 DROs (Debt Relief Orders)**. While in the US, up until the 30^th September 2009, there were 1,402,816 filings for bankruptcy – this figure included 989,227 chapter 7 filings, 14,745 chapter 11 filings, 487 chapter 12 filings and 398,210 chapter 13 filings.

*An IVA is an alternative to bankruptcy, offering borrowers the chance to clear unmanageable unsecured debts in five years, and have the debt they can’t afford to repay written off.

** A DRO is also an alternative to bankruptcy, and was introduced on April 6^th 2009. It is designed to help people who have very few assets and debts of less than £15,000.

So, now both economies are ‘officially’ out of recession, can we expect things to stay this way?

Although it is hard to predict what may lie ahead for both economies, many experts are expecting a slow recovery from the two countries. This isn’t to say that they won’t dip back into recession though, which is always a possibility when economic growth, particularly in the UK, has been so weak

The following shares are recommended buys i have researched from the past week from major brokers and publications.  My findings are below:

BUY

NetPlay TV (NFDS) - This company is a TV gaming company which has recently got an investment of £12.8m from a private firm and have also has one a major contract.  This company has a great future ahead of it.  This one is one to buy and keep hold for a while.  Gambling is very popular at the moment during the recession.  Source: “Shares”

Price - 27p

52 wk high – 29p – 52 wk low – 14p

Domino’s Pizza (DOM) – Fast food chain Domino’s Pizza have had 35% increase in profits from the 6 months leading up to june 2009 as more people dine in at home.  It current has a P/E of 16.  Source – “The Daily Telegraph”

Price – 235P

52 wk high – 251p – 52 wk low – 156p

Electrocomponents (ECM) – This company supplies essential parts to engineers around the world.  The business has stabilised recently and is pretty solid with a yield of 7%.  Source: “The Sunday Telegraph”

Price – 144.50

52 wk high – 192p – 52 wk low – 113p

The 2nd largest US bank JPMorgan has announced that profits have risen for the first time since 2007.  This has beat all estimates from analysts putting a smile back on investors faces.

Second quater earnings had increased to $2.7 billion, which is 28 cents per share.  Compared to $2 billion, 53 cents per share a year earlier.

14 analysts who surveyed the company estimated an average price share of 5 cents a share a while back.  Investment banking revenue from trading and stock and bond underwriting is helping offset rising defaults on consumer loans, such as mortgages and credit cards.  This has allowed Jamie Dimon (CEO) to post net income during every quarter of the US recession that started back in 2007.  JPMorgan is the only bank within the nations top five to manage that feat.  Lets hope the others are soon to follow.

Charles Bobrinskoy who is vice chairman of Ariel Investments in Chicago said “This is a real tribute to Jamie Dimon” in a recent television interview.

JPMorgans 15 percent gain this year on the New York Stock Exchange is the 2nd best performance in the 24 company KBW Bank Index just behind State Street Corp.  The stock climbed 4.5% to $36.26 in composite trading yesterday.

The bank has made $1.47 billion in profit which has quadrupled since last years 2nd quarters earnings.  The boost in profit was from fees from underwriting stock and bond deals and fixed income trading. 

Goldman Sachs Group Inc recently said on july 14 that it made $3.44 billion in the quarter from trading and underwriting stock.  Revenue was up from $9.43 billion last year to $13.8 billion this year ending month June 26.

The pound has recently enjoyed a rally for the past few months from its lows. Recently it gained 24% against the $US dollar, 20% against Swiss franc, and 16.7% againsts the Euro. Traders are wondering whether a sharp fall is nearby as this rally can’t last much longer with the pattern that is forming.

British shares are mainly invested in by oversea investors. When risk appetite rises they have to buy pounds in order to invest in more UK shares. When risk appetite wanes, sterling currency gets hit as oversea investors start to sell british assets and repatriate the proceeds in other countries.

Compared to the US market the UK stock market is cheap compared by historic trends. But the UK market is still a vulnerable market to be in as there still could be further falls to come. The recession is far from over and the credit crunch seems a long way of from a full recovery. Once the banks start lending again this is when we will start to see the green shoots and the start of a recovery, until then its a slow ride downwards. The banks are still short of capital so they are still very cautious about lending.

In previous anxious times the Swiss Franc and the Yen have been a safe investment for currency investors. But at the moment both are already very high levels against sterling. Also the government in both countries are keen to prevent their currency from gaining too much strength.

“Be prepared for a lot of unhappy guys out there,” writes Reihan Salam.  Thanks to the Great Recession, the age of male dominance is coming to an end.  More than 80% of job losses in America and Europe have fallen on men, with some bloggers already calling this the “he-recession”.  Indeed, a huge shift in power from men to women is now well under way – Lithuania and Iceland have already rid themselves of the men “who got us into this mess and had a lot of fun doing it”, and elected women to run their countries.  Across the globe more women are becoming the primary bread winners as the realisation dawns that “the aggressive, risk-seeking behaviour that has enabled men to entrench their power has now proven destructive and unsustainable”.  So the most enduring legacy of the Great Recession will not be the death of Wall Street, Western finance, or even capitalism.  “What will not survive is macho.”

Source: Moneyweek

A recent survey shows that businesses are still declining in May despite optimism that the market was starting to pick up.

This shows that shoppers are still wary about spending money in this difficult times.  CBI which took the survey of many retailers said that 31% of retailers reported rising sales in May compared to last year May.  48% reported falling sales in May, giving a net balace of 17%.  Which gives a good balance of +3%, in April, which some analysts hoped had marked the beginning of a retail recovery.

The CBI has said the decline has slowed down compared to 40-50% negative balances seen in January, which is giving signs that the end of the recession is not to far away, possibly by the end of 2009.

A decline in consumer spending by money struggling shoppers fearing for their jobs drove the sharp fall in GDP, of 1.9%, in the first three months of 2009.

A few days after British Airways annouced they have made a loss Virgin Atlantic have annouced they have doubled their annual profits.

Profits have soared from £34.8m to £68.4m despite the economy being in a recession and oil prices.

Virgin Atlantic part owned by Sir Richard Branson flew 5.8 million passengers over the period, helped by their premium service as a number of premium travlers enjoyed their service.  Where as British Airways reported a reduction in 13% of their premium service showing that Virgin Atlantic are the top performers in this sector.

With the high prices of fuel Virgin Atlantic reported they spent £1bn on fuel last year,  which at one point last year the price was $147 a barrel.  They profited from the rate of currency exchanges

Currently Virgin Atlantic employes 8,500 and has 38 Airplanes.  The staff will receive a 10% bonus from the companies profits.

Branson said: “To increase profits against a backdrop of such a severe recession is an excellent achievement by all of our staff.”