* "Growth has been much stronger and unemployment has fallen much faster than either we or anyone else expected". So said Mark Carney, the Bank of England Governor, in his Mansion House Speech last Thursday.
* Mr Carney went on to warn that UK interest rates could rise sooner than widely expected. Markets reacted by bringing forward the timing of the expected first rise in UK rates from February 2015 to November of this year. The market sees a 65% chance that this will be followed by a further quarter point rate rise in February 2015, taking the Bank's base rate to 1.0%.
* It has been a long time since the Governor of the Bank of England has had to worry about the risk that UK growth might be too strong. But a quick glance at the latest consumer data helps explain the Bank's concerns.
* In the last year, the volume of UK retail sales has risen by 5%, car sales by 13% and the number of mortgage approvals by 14%.
* Our favourite, though hardly representative of the consumer story, relates to the rising tide of luxury basement conversions taking place in London. Developers have found that it can be cheaper to bury a digger used to excavate space under a new basement than go to the expense of getting a crane in to extricate it. According to one developer 1,000 diggers may have been buried under London's most exclusive streets in this way.
* The turn around in the UK jobs market has been remarkable. Last August, Mr Carney anticipated it would take three years for the UK unemployment rate, which then stood at 7.6%, to fall below 7.0%. In the event it got there in just five months, falling to 6.9% in January of this year, amid the fastest pace of job growth the UK has seen in a quarter of a century.
* UK consumers are certainly in buoyant mood. Consumer confidence is at the highest level in 20 years and consumers expect the economy, and their own finances, to improve over the next 12 months.
* On the face of it this optimism may seem a little odd. Britain's consumer recovery has been accompanied by a continued squeeze on spending power, with inflation running ahead of earnings. How have consumers been able to spend so freely and why are they so upbeat?
* Part of the story is that spending power has been bolstered by welfare benefits and incomes from pensions and investments. Record numbers of people are in work, and this means more spending power in the economy, even if growth in per head earnings has been negligible.
* Rising equity and house prices have increased household wealth and raised consumer spirits. Coupled with greater optimism about the economic outlook this has given consumers the confidence to save less. The proportion of household income saved has dipped from a recent peak of 8.1% to 5.0%.
* Consumers have been buying more on credit and have had an enormous windfall from compensation payments made by banks for the mis-selling of payment protection insurance (PPI). £14.7 billion has been paid to consumers in PPI compensation since January 2011, enough to finance half of the increase in consumer spending over the period. A further £5.0 billion or so of payments are in the pipeline.
* Mr Carney made clear in his Mansion House speech that his main worry about the consumer was about consumer debt, not house prices, and that his first line of defence was controlling mortgage lending.
* The Bank of England has already taken steps to dampen riskier mortgage lending. Last autumn mortgages were removed from the Funding for Lending Scheme which was originally designed to boost lending to consumers and to companies. In April, the Mortgage Market Review came into effect, putting additional checks on mortgage lending.
* It was surely not without significance that last week the Chancellor gave the Bank new powers over bank lending. That decision came just ahead of tomorrow's meeting of the Bank's Financial Policy Committee, which Mr Carney chairs. The Committee, whose remit is to safeguard the resilience of the financial system, could agree to put its newly granted powers into action as soon as tomorrow.
* The Bank has to tread a difficult line. The tightening in mortgage standards, and the rise in mortgage rates this year, are already having an effect. According to the Royal Institute of Chartered Surveyors, enquiries by would-be home buyers to estate agents have slowed in recent months. And the Bank's own credit conditions survey shows that demand for mortgages is easing.
* The UK consumer looks in pretty good shape to withstand the sort of "gradual and limited" interest rate increases that Mr Carney envisages. Consumers cut debt levels, reducing the ratio of household debt to incomes from a peak of 170% in 2008 to just over 140%. Earnings, though still remarkably subdued, seems likely to head up in coming months in response to a much tighter labour market. Meanwhile, surveys show corporate hiring intentions are buoyant, pointing to further growth in employment.
* The Bank wants to take some of the pressure out of the housing market without knocking the consumer out. We think the momentum behind the consumer recovery will enable it to cope with a reduced, and rather pricier, supply of mortgage credit.
MARKETS & NEWS
UK's FTSE 100 ended the week down 1.2%, with growing uncertainty over global growth prospects.
Here are some recent news stories that caught our eye as reflecting key economic themes:
KEY THEMES
* The World Bank cut its forecast for global growth in 2014 to 2.8% from 3.2%, with growth for developing countries downgraded most
* UK employment rose by 345,000 to a record 30.5m between February and April, although prices once again rose faster than wages
* Bank of England governor Mark Carney warned that an interest rate rise "could happen sooner than markets currently expect"
* A man from Surrey gambled £400,000 at odds of 1/4 on Scotland voting 'no' in the upcoming independence referendum, in one of the largest political bets ever placed in the UK
* Japanese tourism-related revenues exceeded expenditures for the first time in 44 years, due to growing visits from middle-class Chinese, Thais and Indonesians
* Uber, the private taxi-hailing app, became the third most-downloaded app on Apple's UK App Store, jumping more than 30 places in the download rankings on the day that thousands of taxi drivers stated a protest against the company
* The Financial Times (FT) reports that Jaguar Land Rover plans to build an engine factory in China, its first ever outside the UK
* UK car exports have more than doubled over the past decade to £24.8bn last year, thanks to a shift to producing premium vehicles
* Chinese internet group Alibaba is launching '11 Main', its first direct-to-consumer online shop for the US
* UK industrial production rose for a third straight month in April, as growth in plastic and rubber product manufacturing hit a 40-year high
* UK industrial production rose for a third straight month in April, as growth in plastic and rubber product manufacturing hit a 40-year high
* The producers of the MSCI Index have decided that South Korea will remain an emerging market for 2015, despite being the world's 15th largest economy
* US search giant Google agreed to buy US drone manufacturer Skybox Imaging for $500m, to help keep its Google Maps product "accurate with up-to-date imagery"
* Global IPO fees are up nearly two-thirds this year according to Thomson Reuters, with a resurgence of deals in Europe and Asia
* Anheuser-Busch InBev, the world's largest brewer, quickly agreed to publish the ingredients in their beers after an American blogger gathered 44,000 signatories on an online petition
* 'Eugene Goostman', a computer simulating 13-year-old boy, became the first computer to pass the 'Turing test', by convincing 33% of interrogators into thinking it is human
* The Church of England posted an anti-payday lending, pro-credit union rap on their Soundcloud profile, with the song by Charles Bailey, Question Musiq and Delilah endorsed by the Archbishop of Canterbury
* Female-named hurricanes have historically been more deadly because people neither consider them as risky nor take the same precautions, according to researchers at the University of Illinois – girl force winds
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