Governor of the Bank of England Mark Carney has warned that, despite a recent strong performance of equity and bond markets, the UK economy could be set for a slower period in the coming months.
In a speech to the Local Government Association last week, Carney said that investors had been pushing markets higher in recent months in a show of faith in the ability of central banks to fix the global economy’s lacklustre growth. However, this faith could be unjustified, according to Carney, as a result of a number of factors.
At the same time, geopolitical events, from trade wars to Brexit negotiations, were hampering the prospects for growth and damaging consumer and business confidence.
“Households have also become gloomier about the general economic outlook.”
Carney said: “Business confidence has fallen across the G7 to its lowest level in five years with sentiment among manufacturers particularly weak. Households have also become gloomier about the general economic outlook.”
Citing the ongoing trade war between the US and China, Carney cautioned that UK growth and inflation could be impacted in the coming months. He added: “Whether current trade tensions shipwreck the global economy or prove to be a tempest in a teacup will have an important influence on the outlook for growth and inflation in the UK.”
Growth returns, just
On Wednesday, the Office for National Statistics (ONS) announced that the economy had grown by 0.3% during May, having seen a decline of 0.4% in April. While it was somewhat positive news, economists echoed Carney’s pessimism about the future outlook.
Brett Brettell, senior economist at Hargreaves Lansdown, said: “Storm clouds look to be gathering over the UK economy as consumers and business remain hamstrung by Brexit uncertainty.”
With Q2 results due in early August, Brettell said that growth is likely to be slower than in the first part of the year. He added that he felt that while the economy had grown overall during the second quarter, it would be significantly lower than the 0.5% growth during Q1