By Andy Bruce
LONDON, Oct 5 (Reuters) - Britain's economic bounce-back
after coronavirus lockdowns is being hampered by problems in
supply chains, a jump in inflation and the risk of a rise in
unemployment, complicating the task for policymakers of
steering the recovery.
Former Bank of England chief economist Andy Haldane says
Britain is in a VILE era of volatile inflation, low expansion.
Financial markets now think the BoE is all but certain to
raise interest rates by February but some economists, worried by
signs of a flagging recovery, aren't so sure.
Below are some of the gauges of Britain's economy that are
likely to be on the minds of economic policymakers.
INFLATION
Britain's inflation rate hit 3.2% in August, its highest in
almost a decade. Some one-off factors accounted for the record
jump from July but the BoE thinks inflation is heading above 4%,
more than double its 2% target.
The BoE is watching for any signs that consumers are losing
confidence that inflation will be contained in the longer run.
Public expectations for inflation in the year ahead rose
sharply in September, according to a Citi/YouGov survey which
may have weighed on the minds of BoE rate-setters. They said
last month that the case for raising rates was strengthening.
GROWTH FADING?
While Britain's economy grew rapidly earlier this year as it
reopened from a third COVID-19 lockdown, the latest readings
show this momentum has largely dissipated. Economic growth
slowed to a crawl in July, according to official data, and
surveys of businesses and consumers suggest sluggish growth
persisted into the second half of the year - even before the
most severe supply chain problems seen in recent weeks.
SUPPLY CHAIN PROBLEMS
There has been no let-up in the supply chain and staffing
problems for British manufacturers dealing with hefty delays
from suppliers, according to the latest IHS Markit/CIPS survey
of businesses.
That was even before panic-buying at petrol stations, caused
by a shortage of tanker drivers, led in late September to the
biggest week-on-week drop in car traffic since early June -
another unpromising sign for the economy.
The shortage of workers, something seen in other economies
around the world, has worsened since Britain decided to leave
the European Union and end free movement of workers from the
bloc. But Prime Minister Boris Johnson denied on Tuesday Britain
was in crisis and said its "natural ability to sort out its
logistics and supply chains is very strong."
CONSUMER SPENDING
The supply chain disruption and rising inflation prompted a
hefty hit last month to the GfK gauge of consumer confidence -
historically a good indicator of household spending.
Households are also facing cuts to state benefits and tax
increases for working people.
BoE data published last week suggested consumers are once
again leaning more towards saving than spending.
JOBS AND WAGES
Britain's unemployment rate has fallen in six of the last
seven monthly reports, helped by the economic recovery and the
government's jobs-protecting furlough programme.
That scheme ended at the end of September and the BoE is
keeping an eye on whether unemployment is about to rise again.
Wages have been rising fast although the official measure of
earnings growth has been boosted by statistical distortions
caused by the pandemic. Still, inflation has started to bite
into earnings: the official real-terms measure of total wage
growth has declined for three months running.
(Reporting by Andy Bruce, Editing by Timothy Heritage)