LONDON (Reuters) - Britain’s beleaguered economy will narrowly miss a triple-dip recession but with growth this year likely to be tepid at best, it will need more support from the Bank of England, a Reuters poll found on Thursday.
The poll of over 60 economists, taken in the past week, found only two predicting the country slid into its third recession in less than five years last quarter, with the median showing negligible growth of 0.1 percent.
Weaker than the 0.2 percent prediction in a poll taken a month ago, and the lowest median since October 2011, it has prompted economists as a whole to raise expectations on the total amount of newly created cash the bank will pump into the money supply through its asset purchase programme.
So far the Bank has printed 375 billion pounds under bond-buying quantitative easing and economists now see a total spend of 425 billion pounds - around a quarter of gross domestic product and 25 billion pounds more than predicted in a poll taken two weeks ago.
According to the latest poll there is a 60 percent chance of additional QE this year, unchanged from a March 27 poll, with the majority expecting it to come sooner rather than later.
“I‘m flexible as to when they move, it will be whatever month they get softer data. It could be May .... it could be July if they wait for Carney,” said Michael Saunders at Citi, one of the first to say the programme would be restarted.
Bank Governor Mervyn King steps down at the end of June and will be replaced by Canadian Mark Carney, whose enthusiasm for bond purchases is uncertain.
In March, the Monetary Policy Committee voted six to three in favour of maintaining the status quo, with King in the minority. Minutes from the April meeting are due next week.
MPC member David Miles said on Wednesday that weak economic growth and subsiding price pressures suggest Britain’s central bank should run an extremely loose monetary policy.
His colleague, Paul Fisher, who voted with Miles and King for stimulus in February and March, said on Tuesday Britain’s economy still needs support from more central bank asset purchases but was cautious about any benefits from more QE.
Britain’s economy has struggled in the face of a government deficit-cutting campaign and a struggling euro zone - its main trading partner.
Another Reuters poll predicted the euro zone would contract 0.4 percent this year while after a strong start to 2013 for the United States, the world’s largest economy is set to slow down as some of the effects of its own spending cuts take hold.
Meanwhile, rising unemployment and falling real wages have prevented consumers from spending. Unemployment is likely to reach 7.9 percent this year and next.
Britain’s economy has flatlined in the last few years and will only grow 0.7 percent this year, slower than the 0.9 percent growth predicted last month and the weakest since Reuters began 2013 polling. It is seen picking up speed to 1.5 percent in 2014.
“UK activity picture remains fairly flat. Inflation is, once again, coming out on the high side. Recent rises in energy and tuition fees suggest little near-term relief,” said David Tinsley at BNP Paribas.
“Moreover, sterling’s effective exchange rate has fallen more than 5 percent since January and this will be reflected in higher import prices and, subsequently, in inflation.”
Having fallen in recent months inflation is expected to rise again, peaking at 3.0 percent this quarter and next, and medians do not show it falling below the central bank’s two percent target before next July at least.
But Chancellor George Osborne altered the BoE’s remit last month to give it clearer leeway to ignore temporarily above-target inflation. He has also asked Carney to look at the case for long-term commitments on loose policy, something pursued by Canada and the United States.
The Bank cut interest rates to their current record low of 0.5 percent over three years ago and the poll did not predict any movement until July 2014 at the earliest - the end of the forecast horizon.
Polling by Sarmista Sen and Ramya Muthukumaran. Editing by Jeremy Gaunt