So things are getting better – but it’s no thanks to the Bank of England
F rom the fog of contradictory economic data over recent months comes a sense of direction. Suddenly, there is no more talk of recession, even as business surveys show firms doing OK. Instead, the picture is clear and there is no doubt the economy is growing again.
A slump that was supposed send the economy backwards in the first half of this year has vanished, notwithstanding worries about a global banking meltdown and credit crunch. That leaves predictions of a decline in economic activity being replaced by an expansion during the second, third and fourth quarters of 2023. It’s quite a turnaround.
On Friday, surveys of manufacturing and services companies found a surge in demand for new work in February was exceeded in March, making the latest upturn “the fastest since April 2022”. There was a drag from the 14th consecutive month of falling goods exports – the Brexit effect – but otherwise, businesses reported improving sales and orders.
Bank of England governor Andrew Bailey was until a few weeks ago among the gloomiest of forecasters. Last November he predicted the longest recession since the 1930s. As recently as last month he was holding on to the prospect of a short though painful recession lasting six months. On Friday he swapped his frown for a twisted smile that said yes, the economy was resilient, and much more so than he had previously estimated, but this strength could force him to nudge interest rates higher than he has already. It was a message that said whichever path we take – growth or no growth – we lose.
It follows that the UK is a stagnation nation – a stuck-in-the-mud, going-nowhere economy spluttering into life after the pandemic and still weighed down by privations from the Ukraine war that most of
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