Update2: BOE Dale: Export Growth Uncertain; Inflation To Rise
–Expects Inflation To Rise Signficantly Next Couple of Months
–Adds Detail, Quotes To Version Transmitted At 1305 GMT
SOUTH SHIELDS (MNI) – Bank of England Chief Economist Spencer Dale
said the fall in sterling had boosted UK exports and manufacturing
output, but it was uncertain whether this could continue as global
demand growth slows.
In a question and answer session following his speech here Dale
highlighted the progress manufacturing has made so far but was downbeat
about the economic outlook and he warned inflation was set to rise
markedly in coming months.
“Exports of goods have increased, seen double-digit growth and
we’ve seen that reflected in terms of strong growth in the manufacturing
sector,” he said.
“The level of manufacturing output still has not got back to the
level it was at prior to the crisis, but we’ve seen strong growth in
manufacturing and I think that strong growth in exports has been aided
by two things: we’ve had a pretty strong recovery in world demand and a
low level of sterling,” he added.
“The challenge and uncertainty now is whether exports and
manufacturing continue to grow as we see this slowing in global demand,”
Dale did not vote for an extension of QE at the September MPC
meeting, but he firmly rejected the idea QE amounted to monetizing the
“We are not doing anything that is like Zimbabwe or Germany in the
past, buying government debt but we will hold that debt and we will sell
it off again,” he said.
He said the automatic stabilisers would kick-in if the economy
slowed further and they would support demand.
“If the economy does slow, we’ll see an automatic loosening of
fiscal policy, spending will increase, particularly as spending on
benefits increases. These are called the ‘automatic stabilisers’ and …
importantly in the UK the economic stabilisers are really quite large,”
Dale said what was happening at present, with consumer demand not
growing, was “very unusual in a recovery”.
He noted that real incomes have been under pressure from elevated
“Real income levels are being squeezed by the high levels of
inflation we saw in our economy, those high levels of inflation can be
traced in turn, in particular, to the increase in energy and other
import prices,” Dale said.
With rises in utility prices having been pre-announced by the major
suppliers in recent weeks, it looks inevitable headline inflation will
head higher still.
“I expect inflation to increase quite significantly over the next
couple months, and that’s directly attributable to the increases in
utility prices,” Dale said.
This rise in inflation will, however, be temporary.
“Next year I expect that we will start to see inflation fall back,”
It will fall back in the beginning of next year quite materially …
once the impact of the VAT rise drops out,” he said.
“Unless we see a continuation of past roses in energy prices I
expect we will see inflation fall back further during 2012. As inflation
falls back, the squeeze on household incomes should get less and that
will give them more scope for them to go out and start spending,” Dale
However, the picture for consumption is far from rosy.
“Even at best we will only see a gradual increase in consumption,”
the BOE’s chief economist said.
Dale also said that talk of double-dip was unhelpful “What really
matters for households is the pace of growth and whether it makes
inroads into unemployment.”
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