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They confirm the role of inventories — stocks — in this recession. Mervyn King calls it “the Honda effect”, a slogan the company has taken to using in its advertising. Honda chose to supply customers from stock, shutting down production at its Swindon factory. Last month it restarted.

In the eye of the recessionary storm, the six months from October 1 to March 31, GDP fell by 4.2%. Of this nearly half, two percentage points, was due to the rundown of inventories. At some stage that will be reversed, and it is probably happening already. If it occurred quickly it could produce an unusually strong but short-lived bounce in quarterly growth.

As it is, the first-quarter figures have not changed the view of most economists that the current quarter will see only a modest GDP decline, or better. That is partly based on the view that the inventory cycle has turned, a belief supported by purchasing managers’ indexes for Britain and other countries. The GDP figures tell us it was a steep bungee dive. Subsequent information tells us we have stopped diving.

Amid the wreckage there was another encouraging feature in the GDP figures, highlighted by Michael Saunders of Citigroup. Companies and households, the non-bank financial sector, had a financial deficit 0f 0.9% of GDP as recently as the third quarter of 2007. Now they have a surplus of 7.9% of GDP, a rapid turnround.

According to him: “This is the highest since detailed data on private savings began in 1987, while partial data suggest private savings are now the highest since 1980.” One of the stories of the recession has been about the need for the private sector to undergo a painful adjustment process. For the financial sector that process has a long way to go.

But for companies and individuals, the new numbers are encouraging. They suggest, according to Saunders, “the main part of the inevitable adjustment is probably behind us”. For firms more interested in seeing their customers spend than save, that has to be good news.

PS: With Bank rate stuck at 0.5% and unlikely to change for quite some time, you could be forgiven for thinking that this week’s meeting of the Bank of England’s monetary policy committee (MPC) will be a non-event. Not so.

The big decision is whether to announce a further increase in quantitative easing (QE) from the £125 billion so far agreed upon. On the present timetable, the Bank will get to £125 billion of asset purchases before its August meeting, implying it needs to decide this week whether to go further, to the £150 billion limit it has so far been given by the Treasury. Some on the MPC think, however, it would be better to wait until the fuller discussions it is able to have around its new projections in the August inflation report.

The shadow MPC, which meets under the auspices of the Institute of Economic Affairs, has few qualms about continuing with QE, which it advocated before the Bank adopted it. Most of its members think interest rates should be held at 0.5% and the Bank continue with roughly £25 billion a month of QE until the effects are more clearly showing through, even to the point of adding between £100 billion and £150 billion to the total. It is, says the shadow MPC, “the only effective monetary policy instrument presently available to the authorities”.

QE is manna from heaven for monetarist economists, who are well represented on the shadow MPC. Tim Congdon thinks it saved Britain from a monetary collapse on a par with the Great Depression but is concerned that so much of the money being created is staying in the financial sector. Gordon Pepper thinks the pace of QE has been about right, while Patrick Minford warns against premature exit strategies from the policy.

In the markets, there is a debate about whether this “unconventional” policy from the Bank will be inflationary. For me, much more relevant is whether it will work in boosting the economy. We still cannot be sure of that.

david.smith@sunday-times.co.uk

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