THE BLOG

Carney Will Be Hoping His 'Lucky Streak' Continues

03/07/2013 16:31 BST | Updated 02/09/2013 10:12 BST
AP

Gamblers of any stripe give a lot of credence to the notion of beginner's luck. Sat at the blackjack table for the first time with little funds and even less knowledge of the intricacies of the game I managed to, through dumb fortune, leave the casino with a fair wedge in my back pocket. The luck does run out, of course, as my next trip to the baize will testify.

Mark Carney is by no means a beginner at central banking having been the Governor of the Bank of Canada for 5 years and the Chairman of the Financial Stability Board, an international financial system oversight body, since 2011. However, he must be thinking that he has been graced with a certain slice of beginner's luck since emerging from Bank station, up Threadneedle Street and into his new office at the Bank of England, following a string of positive UK data this week - the like of which we've not seen for some time.

Monday saw the highest reading for the UK manufacturing PMI in two years, and it was the 3rd consecutive time that the sector had beat analyst's expectations. The crucial new orders component that tends to suggest whether demand will be continual, as opposed to stop/start, also rose to the highest level since February 2011. The fact that demand increased from across the world allows some insulation from any shocks that may occur in individual markets, all in all this was a great result for the sector.

We then also saw an increase in UK mortgage approvals to the highest point since December 2009, a sign that possibly the Bank of England's Funding for Lending Scheme may finally be allowing some form of recovery in credit markets. Of course, we are still way below pre-crisis levels, which averaged around 100,000 a month, but a corner may have been turned in the housing market too.

Tuesday, day two for Governor Carney, and it was the turn of the construction sector to post a strong figure, something we haven't seen in a while. Residential building has pushed the construction sector onwards for its 5th consecutive month of improvement and the first consecutive months of expansion since April and May of last year. The employment component of the industry also kicked higher for the first time since February, on expectations that new order levels are likely to be sustained.

However, these two sectors add up to a little less than 20% of the UK economy and without a strong services number this great start would be largely forgotten about. If Carney drew a 10 and a 5 from his first two cards, then Wednesday's services PMI number was the 6 that would give him a winning hand.

He needn't have been concerned, as the services industry posted its best number since 2011 and rose at the fastest pace since 2007. Although we cannot look past the improvement in weather as a key driver of sales volume, increasing business confidence seems to have extended as a result of buoyant future orders.

Alongside strong surveys from the British Chambers of Commerce, which suggested that growth in Q2 could be as high as 1%, and notes from the Bank of England meeting, which showed that lending to businesses and individuals is starting to increase, the signs for the UK are all encouraging.

However, risks to growth do persist, especially from increased rumblings of Eurozone turmoil. The Bank of England may deploy further monetary stimulus into the UK economy as a buffer against any ill winds that the recent Greek or Portuguese negativity will stir-up. In short, we've had a good week and things may be looking up, but we are certainly not out of the woods yet.

That said I hope Carney's good run does continue, but I fear instead that this initial flurry of good news will simply allow him to get his feet under the table before he is called forward to stabilise the UK economy with some more decisive action.