–Adds Detail, Quotes To Version Transmitted At 1950 GMT

EDINBURGH (MNI) – The UK economy is stronger than the upcoming
official growth data will show, Bank of England Monetary Policy
Committee member Adam Posen told reporters here.

Posen said the latest construction data, which point to a sharp
contraction in that sector and could turn Q1 growth negative, were “just
odd” and were a key factor distorting the growth picture. He maintained
that the economy was recovering, and that inflation would return back
to, or below, its 2% target by the end of this year.

He acknowledged it would be a tough call to explain to the public
that core growth was what mattered and he said MPC members were
concerned there would be a hit to confidence if the headline Q1 and Q2
growth data showed the economy contracting again.

Asked how concerned he was about the prospect of the UK
experiencing three consecutive quarters of negative growth Posen said “I
think the economy is stronger that what the data is going to show.”

He cited approvingly research by Goldman Sachs economists showing
growth running at well over 1% on an annualised basis. The problem the
MPC faces is getting the message the economy is growing through to the
public.

“The scarey part is we don’t want to spend our entire life saying
‘Oh, ignore this number, ignore that number’,” Posen said.

The official data showed the economy contracting in Q4, and some
analysts expect both Q1 and Q2 data to be negative as well.

“The concern expressed in the minutes was people will see these
three (growth) numbers and react to them … in negative confidence
terms. We don’t think they are justified but in the end it could still
be a real confidence shock,” Posen said.

Posen withdrew his call to increase quantitative easing by Stg25
billion, which he voted for in March, at the April MPC meeting, voting
instead for no change in policy, this week’s MPC minutes showed.

Asked why he had switched his vote this month rather than in
February or March Posen said he had been on the fence over the extra
quantitative easing in both months.

Given the option of an extra Stg75 billion or Stg50 billion in
February he had voted for the larger number, when the MPC endorsed Stg50
billion, and then voted again in March for the extra but with core
inflation proving resilient he pulled his call in April.

–London newsroom: 4420 7862 7491; email: drobinson@marketnews.com

[TOPICS: M$B$$$,M$$BE$]