Speaking at the Council of Mortgage Lenders’ annual conference this morning, Charles Bean, deputy governor of the Bank of England, said despite “seemingly” reasonable growth of 0.5% in Q3, manufacturing statistics suggest Q4 may not fare so well.
He said: “The underlying rate of expansion has probably eased…business surveys and other indicators point to only very moderate growth at best in the final quarter of this year.”
Bean added that strains in the euro area seem likely to persist for some time yet which will add to pressure on the UK economy “retarding growth there and also on the rest of the world”.
He said: “Some businesses are putting investment projects on hold as a result.”
He revealed that the Bank also anticipates a further fall in real household income, which has already fallen 2.5% in the eight quarters since the start of the recession in 2009 as inflation outpaces wage growth.
He said as the VAT increase falls out of the annual numbers, CPI would fall back by about 1% while he expected falling commodity prices to cause a “sharp slowdown in inflation”.
Bean also revealed that Bank of England estimates that the first round of quantitative easing had boosted UK output “of something like 1.5% to 2%”.
