Bank governor George dismisses 'double-dip' chance

The governor of the Bank of England adopted a resolutely upbeat tone after chairing a meeting of the Group of 10 central bankers, who represent the bulk of the world's most powerful economies.

Speaking on behalf of the G10, Sir Edward said: "As far as the major economies are concerned, there was a clear sense that not just the US, but also the eurozone is through the trough."

Asked about the eurozone, Sir Edward said: "There is no perception of a double dip for Europe or anywhere else."

The governor's sunny outlook for the world economy will reassure analysts, who have worried that the strong rebound in US growth could merely be a temporary phenomenon caused by a slowdown in the decline of inventories.

The US has become even more important to world economic growth in recent years, as the world's largest economy has increased its share of total global demand. Sustained US recovery is seen as essential to sustained global recovery.

But Sir Edward's prognosis failed to convince advocates of the double-dip scenario. Stephen Roach, chief economist at Morgan Stanley, said: "There is a compelling case for a double dip. The US is lacking in the traditional sources which drive cyclical recovery, including home building, consumer durables and capital spending. To pretend that the world is in full-throttle economic recovery is wrong."

Sir Edward acknowledged that the sharp acceleration in US growth at the end of last year was due, in large part, to the inventory cycle. But he predicted: "The prospect for investment spending in the US is positive."

Central bankers expected eurozone growth to accelerate to about 2.5 per cent by the end of the year, according to Sir Edward - close to its long-term trend.

The governor conveyed relaxed outlook on inflation. He said: "One of the interesting features of the discussion was that there was relatively little discussion about inflationary pressures. I think that is a reflection of the fact that for the time being they are really very well contained."

Closer to home, the Office for National Statistics said yesterday that the price paid by British manufacturers for materials and fuel rose by 0.9 per cent last month - boosted by high oil prices. Manufacturers responded with a 0.5 per cent rise in their own prices - the sharpest increase in 18 months.

The British Retail Consortium assuaged fears of inflation on the high street by reporting underlying retail sales growth of only 2.4 per cent last month - the lowest rate in 17 months.