Mark Carney enters his first rate-setting meeting as Bank of England governor this week armed with further evidence of Britain's economic recovery, as a wide-ranging survey signals rising confidence, strong export growth and job creation among U.K. businesses.
The British Chambers of Commerce report, published on Tuesday morning, suggests that the economy is building towards the "escape velocity" that Carney pledged to oversee when he was appointed. It builds on data released on the Canadian's first day at Threadneedle Street that suggested Britain's manufacturers enjoyed their strongest growth in two years in June.
The recent flurry of improved economic news has fanned expectations that Carney and his colleagues will hold fire at the monetary policy committee meeting this week. Economists expect no changes for now to the Bank's programme of printing electronic money, known as quantitative easing (QE), while interest rates are widely seen sticking at their record low of 0.5% throughout this year and probably much of next year, too.
The BCC survey of more than 7,400 businesses puts domestic sales, overseas business and confidence in their rudest health for several years, though not back at the pre-crash levels of 2007. The report will reinforce economists' forecasts that after a timid start to the year, Britain's economic recovery accelerated in the second quarter.
BCC chief economist David Kern now sees a good chance that growth doubled to 0.6% in the April to June period from 0.3% in the first quarter.
Exports by the service sector were the strongest for more than 20 years, according to the BCC report, as IT firms and TV show makers reported solid overseas demand for their work. The BCC said the survey response on exports was a sign UK companies had "untapped potential to expand", but risks remained, with investment and cashflow measures in the survey relatively weak. That echoes official Bank data on Monday showing lending to small and medium-sized enterprises (SMEs) fell by £0.5bn in May after a fall of £0.7bn in April.
While critics of the Bank's QE programme say it risks fueling inflation and further cutting households' spending power, there were reassuring signs on price pressures from a manufacturing report on Monday. Carney, who was pictured in cheerful mood as he arrived at BoE headquarters, was greeted on his first day with news that Britain's factories cranked up production last month as new orders picked up at home and abroad, according to the Markit/CIPS U.K. manufacturing purchasing managers' index.
Activity rose for the third straight month, while on the inflation front pressures subsided as input costs declined and average factory gate prices fell for the first time in three and a half years.
There will be plenty more for Carney and his colleagues to mull over at their two-day policy meeting this week, with purchasing manager surveys due on the shaky construction sector and the dominant services sector.
Related Stories
