New Bank of England governor Mark Carney greeted by upbeat UK outlook

INCOMING Bank of England governor Mark Carney hit the ground running yesterday, starting his new post alongside a bundle of positive figures for the British economy.

The governor had a spring in his step as he arrived to chair his first meeting of the monetary policy committee (MPC) which sets rates and makes decisions on quantitative easing (QE).

Carney, who previously headed the Bank of Canada, shunned his chauffeur-driven car and took the Central Line to work.

As he arrived, Markit announced the best manufacturing purchasing managers’ index (PMI) result since April 2011, with unexpectedly robust figures for June. The index has risen each month for the past four, indicating an upturn in the sector’s prospects, after struggling to achieve growth in the past two years. There was good news across the board, with improvements in the British market, rising demand from abroad and a fall in factory gate prices for the first time in over three years. And the Bank’s own data for May confirmed that mortgage lending is recovering, with the highest value of loans secured on property since October 2008, and the largest number of house purchases since December 2009. There were 58,242 house purchases using a mortgage, up nearly 5,000 from April.

A survey from the British Chambers of Commerce (BCC), released this morning, will also suggest that British business is strengthening after a productive second quarter, with expectations rising in both services and manufacturing.

But BCC chief economist David Kern warned that Carney’s actions would determine the future prospects for firms across the UK. “The monetary policy committee must avoid steps, such as adding to QE, which could trigger a further rise in inflation. At the same time, the MPC should also strive to keep interest rates low to encourage businesses to invest,” he said

The upcoming months will be challenging for Carney, with many analysts expecting him to advocate even looser monetary policy. The rate-setting MPC has voted against previous governor Sir Mervyn King’s desire for more QE for the last five months.

The British economy’s sluggish growth may prove to be a bigger trial for the newcomer, in contrast to Canada, where a shallow recession was followed by a brisk recovery.

The new governor will have to tread a careful path, with price rises still stubbornly above target. Chancellor George Osborne has stressed that while March’s changes to the Bank’s remit will give Carney more options, it will not allow him to ignore the UK’s goal of two per cent inflation.