Gentle recovery under way says King

Mervyn KingBank of England Governor Sir Mervyn King has insisted a "gentle recovery" is under way despite fears that figures this week will reveal another contraction in the UK economy.

In a speech at a CBI dinner in Belfast, the central bank boss said the economy was "moving in the right direction", but admitted activity had been "considerably weaker" at the end of 2012.

His comments come ahead of gross domestic product (GDP) figures on Friday which are expected to show the recovery slammed into reverse in the fourth quarter. Most economists forecast a 0.1% contraction in what will mark a sharp reversal of the 0.9% growth seen in the previous three months.

Speaking at the city's Titanic museum, Sir Mervyn said the "zig-zag" pattern of economic activity continued after the Olympics-fuelled third quarter, adding that "whether negative or positive, growth in the fourth quarter will almost certainly turn out to have been considerably weaker than in the third quarter".

He admitted the UK's recovery has been noticeably slower than in most other countries - with output up only 3.5% cumulatively since 2009 against around 6% in many other economies - while living standards have been squeezed for longer than at "any time in living memory".

However, Sir Mervyn - who is stepping down in June after 10 years in the post - said recent efforts to boost lending to households and businesses was helping support a fight-back in the economy.

He added the Bank stood ready to deliver more economy-boosting measures through its quantitative easing scheme.

"Be in no doubt that we are ready to provide more stimulus if it is needed," he assured.

Sir Mervyn added: "Our economy is recovering, more slowly than we might wish, but we are moving in the right direction."

In a clear signal that the Bank will look to review its inflation remit, Sir Mervyn said the 2% target had "come of age" after nearly 21 years.
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