LONDON (Reuters) - Britain’s economy has recovered around half of its massive fall in output in March and April when the COVID-19 lockdown was most intense, Bank of England chief economist Andy Haldane said on Monday.
“Roughly half of the roughly 25% fall in activity during March and April has been clawed back over the period since,” Haldane told members of Britain’s parliament.
“We have seen a bounceback. So far, it has been a ‘V’. That of course doesn’t tell us about where we might go next,” he added.
Haldane, who was the only member of the nine-strong Monetary Policy Committee to oppose expanding the BoE’s asset purchase programme last month, added that he believed the economy was now growing by around 1% a week, based on business surveys and other less conventional figures such as traffic and mobility data.
However, unemployment was rising rapidly and probably now stood at around 6%, compared with 3.9% in the most recent official data, he said.
In the medium-term, Britain’s economy faced upside as well as downside risks to inflation.
“There has been some fracturing of domestic and global supply chains, raising the costs of some goods and services. And it is possible a higher long-term equilibrium rate of unemployment could cause the earlier re-emergence of wage pressures,” Haldane told parliament’s Treasury Committee.
He reiterated his concern that unemployment could rise to its highest since the mid-1980s as the long-term effects of COVID-19 reduce demand for retail and hospitality workers.
But those workers would not necessarily be able to switch easily to other work, leading to labour shortages in other parts of the economy, potentially pushing up prices.
Haldane also reiterated that the fact that the BoE was considering cutting interest rates below zero did not mean it would necessarily do so, even if the economy needed more help.
“There is also work underway on other potential instruments available to the MPC - for example, further rounds of QE, credit-easing policies and forward guidance,” he said.
Reporting by David Milliken and William Schomberg, editing by Andy Bruce and Hugh Lawson