Carney still upbeat over recovery

Bank of England governor Mark Carney has insisted the UK’s poor trading performance and household debt mountain are no reason to panic as he challenged “pessimists” who believe the recovery could falter.

At a speech in New York, Mr Carney instead set out “reasons for optimism” as he sought to quell the fears of some experts that, following the financial crisis, advanced economies would now be stuck in a cycle of low growth.

He acknowledged the risks of “unbalanced growth” in Britain, with household debt levels at 140% of incomes, a surging housing market and a nearrecord trade deficit.

But he said: “These developments merit vigilance, not panic.”

The governor added: “For the first time in a long time it seems reasonable to expect the hopes and dreams of the holiday season to be fulfilled.” He said news from the UK – which he characterised as a “small, open economy” – was positive, with inflation down to 2.2%, jobs being created at 60,000 a month and growth “for the moment” the strongest in the advanced world.

The governor said the recovery was being driven by a reduction in “extreme uncertainty”, as well as progress in repairing the financial system and an improvement in household balance sheets.

Despite the high levels still owed, debt-to-income ratios had fallen by about 30%.

Mr Carney acknowledged that 850,000 more people were out of work than before the financial crisis and the economy was about 20% smaller than it would have been if precrash growth had continued.

But he took positives from the housing-market revival and better credit conditions, while also playing down concerns about the trade deficit.