UK NGDP growth not playing to Osborne/Carney tune

A James Alexander post

UK NGDP growth was released today together with the second estimate of RGDP figures. NGDP picked up slightly to 2.5% YoY. We had earlier shown a similar trend using Nominal GVA data. The very messy and subsequently revised figures from 3Q and 4Q last year now show two quarters of a very low 2.2% YoY growth.

NGDP growth was very poor before Brexit concerns and has, if anything, now picked up slightly as those concerns have increased. Rather ironic given all the scaremongering – perhaps the GBP weakness helped ease the concerns.

Carney solemnly swore that there had been no government interference forcing the Bank of England to take its strong anti-Brexit stance. We believe him. All the ruling elites of both the UK and the Rest of the World are taking the same view. They are not at the sharp end of the woeful nominal growth that constantly drags down real growth. Above everything they prefer governments to be remote from the public and in the hands of self-selected technocrats who should be trusted to do the right thing.

The evidence from the UK is that Carney is failing badly. “Remain” economists remain surprised by the strength of the Brexit support despite all their best efforts. Well, they should look at nominal growth and not be so surprised. Mainstream macro-economists fail in so many ways, but none more so in their relaxed attitude to low Aggregate Demand (aka NGDP) growth. The Brexit debate is a sideshow compared to this abdication of responsibility.

Carney and his political master George Osborne should have been alarmed at the trend of nominal growth in the UK. Even if Brexit concerns are not preventing a small rise in nominal growth the rate is still far too low.


Carney still believes that the next move is up in interest rates, so cementing a policy of passive monetary tightening. When he strongly repeated his view this week, Sterling rose strongly. Just great. It’s not clear if all his Monetary Policy Committee agree with him but they don’t seem brave enough to speak out much.

In recent exchanges over Brexit Carney looks like a very hard man to cross. His responses to Jacob Rees Mogg in Parliamentary questions over the BoE’s anti-Brexit stance were a cross between Tony Blair and Bill Clinton. About right as he has passed from wannabe Canadian politician to global stage-trotter. He has become the model of a very modern hawkish central banker more concerned about fighting non-existent inflation threats than doing his upmost to help create prosperity. This is a shame.

We had high hopes back in the day he openly talked about NGDP Targeting. If he had to face an electorate worried about prosperity perhaps he would change his tune. It probably wouldn’t have much effect given the little impact it seems to have on his boss, Osborne.

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