Britain is not in recession but rather in a persistent period of zero growth, one of the Bank of England’s rate-setters has said.
Martin Weale said he preferred take the long-term view and characterise the current crisis, which has seen the economy shrink 1.4pc in the nine months to June, as a “sustained period of stagnation” rather than a collapse back into recession.
His view was reflected in his prediction of an end to the lengthy squeeze on household incomes and a “gradual revival” soon.
Mr Weale also hailed a new “underlying sense of confidence” in Britain. “The economy is stagnating but I have not heard people say 'this is a disaster’,” he said.
“For quite a long period now, we have had slight upward movement, and slight downward movement. Rather than describe it as a double-dip recession, I would describe it as a sustained period of stagnation.”
Since the recession struck just over four years ago, the economy has struggled to gather momentum. In the three years since the downturn ended, the economy has barely recovered and is still 4pc below its pre-crisis peak.
According to the National Institute for Economic and Social Research, the UK will take even longer to recover fully than after the Great Depression of the 1930s. Mr Weale said: “Not only are we not making any progress, but we are not growing at all.
My hope is that there will be a gradual revival.” However, he remained confident that growth will return shortly, so long as the eurozone crisis does not escalate, as pressure on household incomes is easing. “I think that the squeeze on household spending through rising fuel and petrol prices is coming to an end.
The big uncertainty is how the situation in the eurozone develops,” he said in an newspaper interview. “It is perfectly plausible that we get a shock; the eurozone is the biggest source of uncertainty.”
Wages have failed to keep pace with inflation for two years now, eating into disposable incomes and reducing consumer spending — the dominant part of economic activity.
This week, official figures showed that inflation unexpectedly rose to 2.6pc in July, while average pay grew at a quarterly rate of 1.6pc.
However, the Bank has forecast that inflation will fall to 2.1pc in the last three months of 2012 and drop below 2pc target from late 2013 onwards, taking some pressure off family finances.
In July, Mr Weale was one of the majority of rate-setters who voted to increase quantitative easing by £50bn, taking the total to £375bn.
telegraph.co.uk
Martin Weale said he preferred take the long-term view and characterise the current crisis, which has seen the economy shrink 1.4pc in the nine months to June, as a “sustained period of stagnation” rather than a collapse back into recession.
His view was reflected in his prediction of an end to the lengthy squeeze on household incomes and a “gradual revival” soon.
Mr Weale also hailed a new “underlying sense of confidence” in Britain. “The economy is stagnating but I have not heard people say 'this is a disaster’,” he said.
“For quite a long period now, we have had slight upward movement, and slight downward movement. Rather than describe it as a double-dip recession, I would describe it as a sustained period of stagnation.”
Since the recession struck just over four years ago, the economy has struggled to gather momentum. In the three years since the downturn ended, the economy has barely recovered and is still 4pc below its pre-crisis peak.
According to the National Institute for Economic and Social Research, the UK will take even longer to recover fully than after the Great Depression of the 1930s. Mr Weale said: “Not only are we not making any progress, but we are not growing at all.
My hope is that there will be a gradual revival.” However, he remained confident that growth will return shortly, so long as the eurozone crisis does not escalate, as pressure on household incomes is easing. “I think that the squeeze on household spending through rising fuel and petrol prices is coming to an end.
The big uncertainty is how the situation in the eurozone develops,” he said in an newspaper interview. “It is perfectly plausible that we get a shock; the eurozone is the biggest source of uncertainty.”
Wages have failed to keep pace with inflation for two years now, eating into disposable incomes and reducing consumer spending — the dominant part of economic activity.
This week, official figures showed that inflation unexpectedly rose to 2.6pc in July, while average pay grew at a quarterly rate of 1.6pc.
However, the Bank has forecast that inflation will fall to 2.1pc in the last three months of 2012 and drop below 2pc target from late 2013 onwards, taking some pressure off family finances.
In July, Mr Weale was one of the majority of rate-setters who voted to increase quantitative easing by £50bn, taking the total to £375bn.
telegraph.co.uk
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