Growth is inching ahead rather than running away

HERE’S the Bank of England’s now departed chief economist Andy Haldane on June 30 warning about runaway economic growth.

Inflation was surging, he said, indeed it was “significant and persistent”. The Bank might be forced into a “handbrake turn”, suddenly ratcheting up interest rates to stop the economy from overheating.

Most of the rest of the Bank, including Governor Andrew Bailey, think Haldane was a little overheated himself.

They thought that by far the greater risk is that a postlockdown bounce-back quickly runs out of steam, as consumers and businesses remember they are still in a pandemic and batten down the hatches.

Since Haldane spoke most of the available evidence has suggested the Bank is right and he is wrong.

For May, the GDP growth figure was an anaemic 0.8%, which doesn’t suggest an out of control boom, and was a sharp fall from April’s 2%.

Today we learn that, despite Euro 2020, retail sales rose by just 0.5% in June. Outside the world of economics, what this means is: nothing happened. Consumer behaviour barely budged.

And the PMI figures for July — a monthly measure of growth — were the weakest for four months.

None of this speaks of an irrational exuberance in need of adult intervention. This is not a riotous party that needs the police to be called, it is a lumpy, tentative recovery.

With infection rates again soaring the risk to the economy is plainly that everyone retreats in caution rather than that they splurge cash they don’t really have.

For the Government, the question has to be whether ditching all Covid restrictions is going to, health issues aside, do more harm than good to the economy.

Perhaps the rest of us can take heart that the Bank of England does seem to know what it is talking about.