EDITOR'S LETTERMerryn Somerset Webb
A worrying return to growth
We said here a few weeks ago that we thought the UK recession had been worse than the official numbers suggested. We also said that horrible recessions tend to be followed by fabulous-looking rebounds. And that we therefore expected the recovery in the British economy to be rather better than George Osborne could have dared dream of only a few months ago. This is one of those rare occasions when we have turned out to be right quickly enough for our predictions to be of interest (we are often a good few years ahead of events).
Statistics have come out showing British manufacturing output growing at its fastest rate in two decades. Construction is doing even better. Meanwhile, corporate investment intentions are at a six-year high, the number of new houses underway is up 7%, new orders in the services sector are growing at their fastest since 1997, and the number of houses in which no one at all is working is at its lowest levels since 1996. Add it all up and the OECD think tank reckons Britain could grow at 3.5% (annualised) in the second half. That would be one percentage point more than the Bank of England predicted only last month, and looks like some of the best economic growth in the developed world.
This all gives us something new to worry about: Bank of England governor Mark Carney. He wants to keep interest rates as low as possible for as long as possible. But with numbers such as this, he is going to be under a lot of pressure to bring a rate rise forward.
• Read the full editor’s letter here: A worrying return to growth