THE Bank of England’s assertion that the economic recovery has definitely “taken hold” is official confirmation of what a raft of data from the services to the manufacturing industries has been telling us for some time.
Governor Mark Carney has solid statistical backing for his claim that you don’t need to be an optimist now to think that Britain’s glass is half full.
Unemployment is falling faster than expected and the bank believes inflation should hit its medium-term target of about 2 per cent over the next year.
The central bank also raised its economic growth forecasts for this year in yesterday’s inflation report to 1.6 per cent from 1.4 per cent. This is the most upbeat medley of positive news we probably could have hoped for.
The sting in the tail of this, triggering falling equities yesterday, was the fear that interest rates will rise earlier than previously guided by Carney, ie when unemployment falls to 7 per cent, with the chances increasing, says the Bank, that this criterion could be met by the third quarter of 2015 rather than its earlier forecast of the second quarter of 2016.
Conversely, sterling rose at the prospect that rates might rise earlier than later, even though the central bank still reckons the balance of probabilities is that unemployment will not fall to 7 per cent before the end of 2016.
It is worth remembering that Carney has said repeatedly that interest rates will not go up automatically on unemployment hitting 7 per cent, compared with 7.6 per cent now: merely that without this trigger they are unlikely to rise (even that guidance comes with caveats).
However, it is worth stripping away the sometimes vaguely theological arguments about the exact timing of interest rates coming off their historic lows of 0.5 per cent.
A difference of six months, even a year, will not have a dramatic impact on household living standards or the case for business investment.
It is better dwelling on the underlying picture, excluding the precise timescale of rate rises, and the latest inflation report from Threadneedle Street shows solid grounds for modest optimism.
Given the five lean years Britain has suffered, we should be happy that although this is not the beginning of the end of austerity it is obvious we are now well beyond the end of the beginning.
Plenty good news in store for Sainsbury’s
Sainsbury’s has just hit its 35th quarter of like-for-like sales growth and is the only one of Britain’s big four food retailers to have increased market share amid the competition from discounters Aldi and Lidl.
It is a highly impressive performance from the group by any standards, with plenty still to go for in thriving online and convenience store operations, as well as Sainsbury’s Bank, when it takes full control next year.