charles bean : the economic outlook speech by mr charles bean, deputy governor for monetary policy of the bank of england, to the northern ireland chamber of commerce, belfast, 19 may 2011. * * * good afternoon! it is a great pleasure to be back again in belfast. i am particularly pleased to be addressing you in this historic venue, whose grandeur bears witness to belfast ’ s long history as a key hub for international trade. that is symbolised in the stained glass windows on the ground floor, which show neptune, the god of the sea, flanked by images representing the industries synonymous with victorian belfast : navigation ; spinning ; weaving ; and engineering. the local economy has changed considerably since those days. and change will be a theme that runs through my talk today. it is now 18 months since the economy began to recover from the worst fall in output in the post - war period. since its trough in 2009 q3, estimated gdp has risen 2½ %, leaving it some 4 % below its peak prior to the financial crisis. but towards the end of last year the pace of recovery appears to have slackened. excluding the effects of the snow, which the ons say reduced output by about ½ percentage point in the fourth quarter, activity was reported to have been broadly flat across the final quarter of last year and the first quarter of this one ; see chart 1. there is some doubt about this, not least because the official series for construction output has been highly volatile over the past year and looks surprisingly weak in the light of the commentary of the trade associations. but even if we leave out the volatile construction and extraction sectors by focussing just on manufacturing and services, we are still left with a picture of flattish underlying activity through the end of last year and only modest quarterly growth of just ½ % at the beginning of 2011. it may be that later editions of the data may clarify some of this uncertainty, but some1 other indicators, such as measures of consumer and business confidence and the reports from our agents around the country, also point to a slackening in the underlying rate of expansion around the turn of the year. the crucial question is whether this just represents a temporary “ soft patch ” of the sort often seen during the early stages of economic recoveries, or whether it is instead the harbinger of a prolonged period of slow growth. to answer this, we need to look at the forces driving the various elements of demand. for some while even before the financial crisis broke

of a markedly better economic outlook in the advanced economies. that itself would be a most welcome change. thank you! references committee on international economic policy and reform ( 2011 ). rethinking central banking, brookings institute, washington dc. fratzscher, marcel, marco lo duca and roland straub ( 2013 ). “ on the international spillovers of us quantitative easing ”, european central bank working paper # 1557. king, mervyn ( 2009 ). speech to confederation of british industry, nottingham, 20 january. he, dong and robert mccauley ( 2013 ). “ transmitting global liquidity to east asia : policy rates, bond yields, currencies and dollar credit ”, mimeo, bank for international settlements. moore, jeffrey, sunwoo nam, myeongguk suh, and alexander tepper, ( 2013 ). “ estimating the impacts of the u. s. lsaps on emerging market economies ’ local currency bond markets ”, federal reserve bank of new york staff report # 595. bis central bankers ’ speeches neely, christopher ( 2010 ). “ the large scale asset purchases had large international effects ”, federal reserve bank of st. louis working paper # 2010 - 018d. rajan, raghuram ( 2013 ). “ a step in the dark : unconventional monetary policy after the crisis ”, andrew crockett memorial lecture, bank for international settlements, 23 june. tucker, paul ( 2013 ). “ a new regulatory relationship : the bank, the financial system and the wider economy ”, speech at the institute for government, london. woodford, michael ( 2012 ). “ methods of policy accommodation at the interest rate lower bound ”, federal reserve bank of kansas city symposium, jackson hole. bis central bankers ’ speeches