I am delighted to be giving this speech this evening here in the heart of Westminster and I am grateful to the British American Business Council for hosting this event and to RSM Tenon for sponsoring it. As an active member of the Church of England, I am also very pleased to be giving this speech at its headquarters in Church House. The Church of England plays a vital role in supporting the spiritual health of our nation, just as the Bank of England has a key responsibility in underpinning its economic and financial health. A healthy economy is normally a growing economy. So ensuring the right conditions for a sound and sustained recovery is a key challenge for UK monetary policy at present. And it is that challenge that I want to discuss in my speech to you this evening.
The current recovery in context The UK economy has been recovering for about a year now. So it is relatively early days to pass judgement on how the current recovery is proceeding. However, the performance of the British economy over the first year of this recovery does provide some grounds for encouragement.
The recovery has been somewhat uneven. As Chart 1 shows, after a couple of quarters of rather subdued growth at the end of last year and early this year, GDP picked up strongly in the second quarter – producing the largest quarterly rise in GDP for nearly a decade.
We do not yet have an official estimate of growth for the third quarter, but the National Institute of Economic and Social Research estimates that GDP rose by 0.5% in this period. That would produce an annual growth rate of 2.5% for the first year of the economic recovery – in line with the historical average growth trend and somewhat stronger than the rebound we saw in the early stages of the previous two economic recoveries, in the early 1980s and early 1990s.1 The fact that growth has been uneven from quarter to quarter should not be a great surprise as uneven growth is not unusual as an economy begins to recover from recession.
This return to economic growth must be seen against the background of a sharper fall in output than we experienced in previous post-war recessions. But two more positive aspects of the early stages of this recovery are worth highlighting. First, employment has been more resilient than in past recessions and appears to have turned around more quickly than in the previous recoveries. The total number of people in employment in the UK has increased by over 300,000 since last winter, according to the official Labour Force Survey.
For the full speech see: http://www.bankofengland.co.uk/publications/speeches/2010/speech452.pdf
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