Chart 4: BCC survey activity indicators Balance reporting increased sales/deliveries 60 Services  Manufacturing 40 20 0 -20 -40 -60  Mar-07  Sep-07  Mar-08  Sep-08  Mar-09  Sep-09  Mar-10  Note: Sales/deliveries relate to domestic market Source: British Chambers of Commerce (BCC)  BIS Review 99/2010  5  The CBI’s most recent surveys show a similar picture, with manufacturing industry bouncing back strongly alongside a muted recovery in the services sector (see Chart 5). According to the CBI, retail sales growth appears to have been weak in the last couple of months – though this may reflect some temporary uncertainties relating to the change of government and the Budget, which could have affected consumer confidence and spending patterns. Chart 5: CBI survey activity indicators Balance reporting/expecting increased sales/output 40 Manufacturers output expectations  30  Retail sales  20 10 0 -10 -20 -30 -40 -50 -60  2007  2007  2008  2008  2009  2009  2010  Note: Retail sales – percentage balance reporting annual increase (3 month average); Manufacturing output – percentage balance expecting rise in the next 3 months. Source: CBI Monthly Trends Enquiry and Distributive Trades Survey  I would not want to play down the uncertainties which remain in relation to the growth outlook here in the UK. Access to credit is still being adversely affected by the problems in the banking system.
But monetary policy needs to be forward looking, so that does not add up to a compelling case for a change in monetary policy. The question is how has the growth and inflation outlook changed as a result. In my experience, recoveries have momentum. While growth might not be totally steady and even across sectors, as recovery progresses, various mechanisms begin to operate which can give it added momentum. Pressure on existing capacity grows, causing companies to dust off their investment plans. Supply chains tighten and firms start to re-stock. Memories of the uncertainty created by the shocks that generated the recession fades and confidence recovers. The labour market stabilises and unemployment should eventually start to fall, improving job prospects. These things happen over a period of time, so from month to month not much change may be perceptible. But looking back over a longer period, improvement is clear. In my view, this is the process that has been underway for the last year, and this process of gradual healing and recovery is likely to continue in the absence of big negative shocks which could derail growth. Given our experience over the last few years, we should certainly worry about future major shocks from the international economy. But the big downside worries resulting from the financial crisis which were present a year ago have receded, in my assessment. And the response of monetary policy has played a part in that process – though it has not been the only factor at work.