UK Economy: Forward-Looking Data Clashes with Lagging Indicators

World record holder Paula Radcliffe once shared an interesting factoid about the genesis of her peculiar running style.

Britain's best-ever distance runner - known as much for her steely-eyed toughness as her at-times inelegant gait - was coached by her father as a young athlete to never look behind during a race.

What's the point, he asked rhetorically? Besides, you could easily trip and fall.

Wise words for an athlete. And an investor - at least when considering the plight of the moribund British economy.

Backward-looking data from the Office for National Statistics (ONS) is painting a grim picture of double-recession potential - but it's the forward projections that should give confidence of a turnaround.

Equity market performance has long been considered a leading indicator of GDP growth. Not only because the realities of day-to-day commerce are (or at least should be) reflected in share prices, but also because they include the value forward-looking statements from the men at women at the bow of the economic ship.

So it's a stark contrast indeed between the rear-view mirror of GDP (which last week was measured by the ONS as having contracted 0.3 percent in the final three months of last year) and the first quarter performance of the FTSE 250 (which notched a 14 percent gain).

The FTSE 250 is considered a much-better indicator of UK economic performance, given that the companies inside the index derive the bulk of their revenues from inside the country, in contrast to the benchmark FTSE 100, whose main constituents (banks, miners oil majors) are a much better gauge of global economic growth. It posted a 3% decline in the first quarter.

Monday's manufacturing data from Markit Economics offered another piece forward-looking evidence to suggest UK Plc isn't nearly as close to administration as some of the more excitable mainstream media commentators suggest.

Surging new orders, solid growth in emerging markets and a competitive pound helped life the Markit/CIPS purchasing managers' index (PMI) for the manufacturing sector to a 10-month high.

Collectively, the numbers point to growth (such as it is) of 0.3% in the first quarter. It's not much, but it's a remarkably different view than was given by the Organisation for Economic Cooperation and Development last week. The Paris-based group said the UK would slide back into recession this quarter (defined as two consecutive quarters of negative GDP) and would be the slowest of the G-7 nations to grow once it began to expand again.

Even the beleaguered banking and financial sector seems to be seeing some of the distant economic fog beginning to evaporate. A poll released Monday from the Confederation of British Industry suggests the financial sector added around 5,000 jobs in the first three months of this year and plans to expand headcounts by another 9,000 before the end of the first half. That's an astonishing turnaround for one of the most important employers in the country (with more than 1 million workers) and, perhaps more crucially, one of the most significant contributors to the UK Treasury.

The numbers won't likely be strong enough to support the grim reading from this weekend's political polls for Prime Minister David Cameron, however. After a particularly bad week of headlines, resignations, petrol queues and "pastygate", his approval rating is at the lowest since he took office in May of 2010.

A YouGov/Sunday Times poll released yesterday showed Ed Miliband's opposition Labour Party with 42 percent support, a full nine points better than Cameron's coalition government.

Still, it's worth considering the advice given to a young Radcliffe. It may not be enough to calm the jangling nerves of a Conservative political advisor, but if you're in search of some signs of life for the economy, there's a good deal more visibility in looking ahead than in looking over your shoulder.