(Adds BoE’s Tenreyro, context)
By David Milliken and William Schomberg
LONDON, July 20 (Reuters) – Britain’s economy has recovered about half the output it lost in March and April when the COVID-19 lockdown was tightest, Bank of England chief economist Andy Haldane said on Monday, in a bullish assessment of the economy’s recovery so far.
Haldane’s view contrasts with that of Governor Andrew Bailey – who was more guarded about the strength of the recovery in comments on Friday – and fellow policymaker Silvana Tenreyro who said she expected social distancing to be a lasting issue for pubs and restaurants.
“Roughly half of the roughly 25% fall in activity during March and April has been clawed back over the period since,” Haldane told members of Britain’s parliament. “We have seen a bounceback. So far, it has been a ‘V’. That of course doesn’t tell us about where we might go next,” he added.
Haldane, the only member of the nine-strong Monetary Policy Committee to oppose expanding the BoE’s asset purchase programme last month, said he believed the economy was now growing by around 1% a week, based on business surveys and other less conventional figures such as traffic and mobility data.
Tenreyro told the same panel of lawmakers she was less convinced by these relatively untested indicators, and that after an initial rebound, residual public concerns about COVID-19 were likely to leave the recovery incomplete.
Even with a robust recovery, unemployment is rising rapidly and probably now stands at around 6%, compared with 3.9% in the most recent official data, and risks rising to its highest since the mid-1980s by the end of the year, Haldane said.
However, this did not mean inflation worries could be ignored, he said.
“There has been some fracturing of domestic and global supply chains, raising the costs of some goods and services. And it is possible a higher long-term equilibrium rate of unemployment could cause the earlier re-emergence of wage pressures,” Haldane told parliament’s Treasury Committee.
Tenreyro said she expected the downward pressure on inflation from weak demand to be more powerful than upward pressures from reduced economic capacity.
Haldane also said that the fact that the BoE was considering cutting interest rates below zero did not mean it would necessarily do so, even if the economy needed more help.
“There is also work underway on other potential instruments available to the MPC – for example, further rounds of QE, credit-easing policies and forward guidance,” he said. (Reporting by David Milliken and William Schomberg, editing by Andy Bruce and Hugh Lawson)
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