LONDON, March 2 (Reuters) – The UK economy is showing slightly more momentum than expected and wage growth is proving to be slightly faster than the central bank’s forecast last month, Bank of England chief economist Huw Pill said on Thursday.
Last month the BoE forecast that the UK was likely to experience a shallow but fairly prolonged recession lasting more than a year as households and businesses braced for the fallout from last year’s energy price hikes.
Pill said in notes prepared for an event hosted by the Institute of Directors that recent data has been more positive.
“Survey indicators that have become available since the forecast was released have surprised on the upside, suggesting that the current momentum in economic activity may be slightly stronger than expected,” Pill said.
February’s preliminary purchasing managers’ index (PMI) data, released last week, unexpectedly moved into growth territory for the first time since July.
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BoE Governor Andrew Bailey said in a speech on Wednesday that the bank may not need to hike further.
Members of the BoE’s Monetary Policy Committee (MPC) are divided on whether the surge in inflation last year to a 41-year high has created a major risk of a sustained rise in underlying inflationary pressures.
Pill highlighted how the official measure of private sector wage growth, excluding bonuses, had risen faster in the latest data than the BoE had forecast last month.
“Nonetheless, some high-frequency wage indicators have fallen quite sharply recently,” he said.
“The MPC will continue to closely monitor signs of ongoing domestic inflationary pressures, with a focus on developments in the labor market, wage dynamics, service price inflation and measures of underlying inflation and inflation expectations,” he added.
Reporting by David Milliken; Edited by Elaine Hardcastle and Hugh Lawson
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