The UK economy seems to be improving as the confidence of business is showing improvement, the pace of house price downturn is moderating and credit crunch is slowly easing.

The encouraging news led to sterling nearing $1.5 mark again. It was also most buoyant week for FTSE 100 in last many years, boosted by G20 summit and improvement signs in economy.

The CBI and the Chartered Institute of Purchasing and Supply (Cips) both stated that managers were anticipating improvements in credit and orders. Cips acknowledged that service sector was still shrinking, but the speed of decline was moderating for the fourth consecutive month after reaching the lowest in November.

Cips surveys in construction and manufacturing also found relatively brighter developments this week. This confidence build up is leading indicator of improvement in future economic activity.

Despite all these encouraging signs, employment outlook is still grim. The survey reveals strongest contraction of staff strength in 13 years of available data.

Based on feed back from its members, CBI has indicated that credit crunch is easing. According to chief economic adviser, McCafferty, even if companies are not stating that credit availability is improving, the severity of operations interruptions is not as bad as it was 3 months ago.

The Government’s extension of support to banking sector and easing of monetary policy has started impacting the situation positively.

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