Good news continues as Bank ups its growth forecast - City Comment
15 August 2013
Honeymoons don’t come much easier than Mark Carney’s start at the Bank of England – so far at least.
Thu, 15 Aug 2013 | By Sue Dodd, director, Agile IntelligenceHoneymoons don’t come much easier than Mark Carney’s start at the Bank of England – so far at least.
News of UK economic revival is slowly but surely gathering pace, while the latest from Europe represents the best news for a very long time as the Eurozone reported overall growth (+0.3%) for the first time in 18 months.
On this latter note, not only has Germany powered ahead to bounce back with 0.7% growth between Q1 and Q2, France added a less anticipated 0.5% growth fuelled both by government and consumer spending and, at the other end of the scale, bailed-out Portugal moved well into the black.
Nevertheless, it was still a mixed bag as several other countries remained in recession and unemployment in most, bar Germany, is at near peak levels. Recovery may be just around the corner for much of the Eurozone but capacity among many member economies is still plentiful and job creation may take a while to respond to the better data. However, it’s a start, undoubtedly powered substantially at this stage by German exporters and welcomed by all who trade with the Eurozone.
Back to the UK it seems Q2 economic growth is pretty well cemented now and signs from a raft of economic data suggest an improving trend bar comparison with Olympic sales in Q3 last year.
In the first six months of 2013 GDP grew 0.9% and the Bank of England has brought forward its 2% growth forecast by a whole year to end of 2013. Services growth reached 0.6%, manufacturing 0.4% with tentative signs of exports also picking up while inflation dropped slightly to 2.8% in July, albeit still above target. Unemployment eased again as claimant count fell sharply, with job creation from the private sector driving the labour market forward.
As these welcome reports were absorbed the new governor ‘clarified’ his all new policy to provide forward guidance. Other things being equal interest rates will not be reduced until the UK unemployment rate reaches 7% - but there is an ‘if’. Guidance will be over-ruled if stronger growth is shown to cause inflation to rise above 2.5% two years hence – not an especially high threshold.
This leaves substantial leeway for action; already Monetary Policy Committee members have mixed opinions, so market speculation may be dampened but not silenced. However, interest rates will certainly remain low for considerably longer yet, but 2016? Unlikely perhaps! The Carney approach also appears to be more about information management rather than any serious loosening of economic policy.
Nevertheless, any sound financial management and a recovering economy should be sufficient to satisfy most of us in the light of the past few years and recruitment companies should find just a little more to cheer about as the rest of the year unfolds. Otherwise it would be a strange recovery indeed.
News of UK economic revival is slowly but surely gathering pace, while the latest from Europe represents the best news for a very long time as the Eurozone reported overall growth (+0.3%) for the first time in 18 months.
On this latter note, not only has Germany powered ahead to bounce back with 0.7% growth between Q1 and Q2, France added a less anticipated 0.5% growth fuelled both by government and consumer spending and, at the other end of the scale, bailed-out Portugal moved well into the black.
Nevertheless, it was still a mixed bag as several other countries remained in recession and unemployment in most, bar Germany, is at near peak levels. Recovery may be just around the corner for much of the Eurozone but capacity among many member economies is still plentiful and job creation may take a while to respond to the better data. However, it’s a start, undoubtedly powered substantially at this stage by German exporters and welcomed by all who trade with the Eurozone.
Back to the UK it seems Q2 economic growth is pretty well cemented now and signs from a raft of economic data suggest an improving trend bar comparison with Olympic sales in Q3 last year.
In the first six months of 2013 GDP grew 0.9% and the Bank of England has brought forward its 2% growth forecast by a whole year to end of 2013. Services growth reached 0.6%, manufacturing 0.4% with tentative signs of exports also picking up while inflation dropped slightly to 2.8% in July, albeit still above target. Unemployment eased again as claimant count fell sharply, with job creation from the private sector driving the labour market forward.
As these welcome reports were absorbed the new governor ‘clarified’ his all new policy to provide forward guidance. Other things being equal interest rates will not be reduced until the UK unemployment rate reaches 7% - but there is an ‘if’. Guidance will be over-ruled if stronger growth is shown to cause inflation to rise above 2.5% two years hence – not an especially high threshold.
This leaves substantial leeway for action; already Monetary Policy Committee members have mixed opinions, so market speculation may be dampened but not silenced. However, interest rates will certainly remain low for considerably longer yet, but 2016? Unlikely perhaps! The Carney approach also appears to be more about information management rather than any serious loosening of economic policy.
Nevertheless, any sound financial management and a recovering economy should be sufficient to satisfy most of us in the light of the past few years and recruitment companies should find just a little more to cheer about as the rest of the year unfolds. Otherwise it would be a strange recovery indeed.
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