Britannia Radio

First the bare bones of the unwelcome economic statistics.

Then in twe reports Spencer Dale,  the BoE's chief economist,  seems 
all over the place.  He talks of putting interest rates up again as 
soon as growth / recovery takes hold.  He forecasts the first signs 
at the end of this year but then hastily adds that "the worst 
economic slump in nearly 30 years was showing no sign of easing 
yet" .  Furthermore "the risks around this central path are weighted 
to the downside
so that  "more action may be needed to ensure recovery by the end of 
the year"

So what is he really thinking,  with his own governor saying that we 
cannot DO any more ?   Or is he declaring his independence from 
Mervyn King ?

"If the trumpet give an uncertain sound, who shall prepare himself to 
the battle "

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BBC ONLINE     27.3.09
UK economy shrinks at faster pace

The UK economy shrank even more than expected in the last three 
months of 2008, official figures show.

The data showed the UK's gross domestic product (GDP) was revised 
lower, the Office for National Statistics said.

The economy shrank by 1.6% compared to the third quarter, the most 
since 1980 and more than an earlier 1.5% estimate.

GDP also contracted by 2% in the fourth quarter from the previous 
year, worse than the 1.9% contraction originally estimated last month.

Rising savings
For the year as a whole, the UK economy grew 0.7%, which was 
unrevised. GDP has fallen sharply from 2007, when the UK grew at 3%.

Analysts are expecting the UK economy to shrink in 2009 as whole.
Household expenditure fell by 1%, and all the major sectors of the 
economy contracted.

The figures showed that the savings ratio surged from a negative 
number in the first quarter to almost 5% by the end of the year, as 
people put aside money for hard times.
"On the face of it this rise is good news - it means that a large 
portion of the necessary rebalancing of the economy away from 
spending and towards saving has occurred already," said George 
Buckley, an economist at Deutsche Bank.

The main reason for the weaker growth was a slump in output of the 
construction sector. It fell 4.9% over the quarter, revised down from 
the initial estimate of 1.1%.
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TELEGRAPH 27.3.09
(Two major comments from Bank of England's chief economist)
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1. Interest rates could increase 'with vigour', warns chief economist
The Bank of England's chief economist has warned that policy-makers 
will hike interest rates back up with "vigour" when needed, to keep 
inflation in check.

In a speech to insurers, Monetary Policy Committee member Spencer 
Dale stressed the Bank's focus will remain centred on the need to 
keep inflation on track with the Government's 2 per cent target.

He said: "The committee adjusted monetary policy boldly and 
decisively on the way down in order to meet the inflation target.

"And, let me assure you that, when the time comes, we will be 
prepared to respond with equal vigour on the way back up."

The comments follow shock inflation figures earlier this week that 
revealed a surprise hike in the Consumer Prices Index (CPI).

Rising food and drink inflation had pushed CPI - the official measure 
used by the Bank - to 3.2 per cent last month from 3 per cent in 
January as retailers increased prices to offset higher import costs 
from the weak pound.
While inflation is still expected to retreat sharply as the recession 
takes its course, the figures caught experts off guard.

Mr Dale cautioned the worst economic slump in nearly 30 years was 
showing no sign of easing yet.

He said the contraction in the first quarter was likely to be similar 
to the 1.6 per cent decline seen at the end of 2008 - revised down 
from 1.5 per cent on Friday.

But he gave hope of a recovery starting by 2010: "As we go through 
2009, I believe it is most likely that the pace at which output is 
contracting will ease and that we will see some signs of recovery by 
around the turn of this year."
His speech to the Association of British Insurers also highlighted 
"encouraging signs" from the Bank's quantitative easing programme to 
boost money supply.

He said the yield - or return - on Government bonds, called gilts, 
had fallen, as had yields on corporate bonds.

It is hoped that the yield on corporate bonds will keep coming down, 
as this will effectively reduce borrowing costs for firms and 
eventually households.

However, Mr Dale suggested policy-makers may still have to take 
further action and said the measures introduced so far in the UK and 
globally may be slow to take effect.
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2. Bank of England chief economist Spencer Dale expects signs of 
recovery at end of 2009
[Reuters]
The British economy will probably recover at the end of 2009 but the 
risks are weighted to the downside and policymakers may thus need to 
take more action, Bank of England policymaker Spencer Dale said on 
Friday.

"Although immediate prospects appear bleak, the substantial economic 
stimulus that is underway means that there are grounds for thinking 
that economic conditions may start to improve later this year," the 
BoE's chief economist said in a speech at the Association of British 
Insurers Economics and Research Conference in London.

UK output fell at its fastest rate in nearly 30 years in the final 
quarter of last year, and Mr Dale said a similar fall in output in 
the first quarter of this year appears likely. "But the darkest hour 
is just before the dawn," he added.

Mr Dale's outlook was consistent with the latest edition of the BoE's 
quarterly Inflation Report, which was published in February, though 
he said more action may be needed to ensure recovery by the end of 
the year.
"Whle there is huge uncertainty about the precise form and timing of 
the recovery ... I think the risks around this central path are 
weighted to the downside, reflecting the possibility that the actions 
taken by the authorities around the world ... are slow to take 
effect. So there may still be more to do."

Once recovery set in, the BoE would be as quick to tighten policy as 
it had been to tighten it. "When the time comes, we will be prepared 
to respond with equal vigour on the way back up," he said.

Meanwhile there were promising early signs from the BoE's asset 
purchase schemes, the cornerstone of its quantitative easing policy, 
though it was too early to be sure, Mr Dale said.

The BoE would review each month the scale of the asset purchase 
scheme, currently set at 75 billion pounds over three months, he added