Russell Lynch: Carney is right to fear the economic bogeymen in our two-faced recovery

Economic View: A debt-fuelled surge in house prices seems just what the economy doesn't need

Bank of England Governor Mark Carney hasn't been afraid to show us his PR-friendly softer side this summer: taking the Tube to work, putting a woman on the £10 note, and even wandering around a music festival with his wife. But on the bigger issue – the state of the economy – the Canadian has been stubbornly failing to go along with the steady flow of feelgood news during the past two months, played out against a heady backdrop of sporting success.

His caution was underlined by the very first sentence he uttered at the August inflation report press conference, when he said a renewed recovery "appears" to be broadening. And despite a run of strong news on everything from house prices to car sales – and a record showing from the UK's dominant services sector in July, according to the Chartered Institute of Purchasing and Supply, his verdict was that "we're not at escape velocity right now".

Shouldn't he just cheer up? Go with the flow and enjoy the Ashes? Well, maybe not. Perhaps the Governor is right to cool our ardour, because at this moment our recovery is looking two-faced. How well the nation is doing rather depends on the prism through which you view it. GDP can be measured in different ways – through industry output and through spending (we'll leave income aside for now). As Royal Bank of Scotland's economists point out, the picture of the recovery is far more flattering on the output measure than on spending.

Let's start with the good news. With the economy still 3.4 per cent below its pre-recession peak – lagging all the G7 nations except Italy – no measure is going to be totally rosy. But strip out extremely volatile oil and gas production – just 1.9 per cent of GDP but down 30 per cent since the economy reached its trough in early 2009 – and also lose construction – another small sector that has seen wild swings in the past few years – and, as the left-hand graph shows, the remaining 90 per cent of the economy by total GDP is only 1.4 per cent down on its pre-crisis peak. Excluding oil, gas and construction, the economy has grown by 5.7 per cent since the second quarter of 2009, versus 4.1 per cent on the total GDP measure.

You can make an even more flattering – and controversial – adjustment by removing financial services output, which has been the main handbrake on the recovery. This is on the basis that we've just had a financial crisis where a relatively small sector of the economy (financial services being 9.7 per cent of GDP) has exerted a disproportionate and hopefully temporary drag on the level of output. On RBS's calculations, GDP – excluding oil, gas, construction and financial services output – has indeed already returned to its pre-crisis heights: a 7.1 per cent fall in output has been followed by a 7.2 per cent rebound. So on this basis, four-fifths of the UK economy has grown at an average annual rate of 1.8 per cent since the recovery began in 2009.

There's an obvious health warning on stripping out the bits of the economy that spoil the numbers – like the FTSE finance director's "exceptional" items. But it is undeniable that, on the output measure, most of the drivers of GDP growth have been performing more strongly than the overall figures from the Office for National Statistics suggest. These adjusted measures of growth also seem more in tune with the puzzlingly low level of unemployment throughout the recession, considering the output lost, as well as inflation consistently beating the Bank's 2 per cent target. We shouldn't discount that it is easier to measure inflation and unemployment than growth.

Now the bad news. The graph on the right shows GDP by spending. Despite the austerity narrative, government spending has been the only sector to grow since the onset of recession at the start of 2008, and this is unlikely to last. Household consumption, around two-thirds of the economy, is still well below peak and business investment is down by well over 20 per cent. Net trade, which is not in the graph, has contributed an average of just 0.4 percentage points a year to growth since 2009 – hardly an "export-led" recovery. And the current account deficit, the broadest measure of our standing with the rest of the world, stands at 3.8 per cent, the highest for two decades.

We've had relatively good news on the jobs market this week, though it's a concern that much of the recent euphoria is coming from consumer confidence, picking up in lock-step with rising property prices. A feelgood dose of house price inflation may be catnip for newspaper editors, but it spells danger for an economy not only already dangerously reliant on the lowest interest rates in UK history but now on state-backed subsidies for the housing market. The level of household debt compared with incomes is down from its pre-recession peak to around 140 per cent – but this is still uncomfortably high against the 100 per cent long-term average at the start of the millennium. And as long as wages lag inflation and debt levels stay high, a sustained consumer recovery is built on shaky foundations; a debt-fuelled house price surge seems just what the economy doesn't need.

The continued lag in business investment is more worrying still if, as many economists fear, it does serious damage to the UK's long-term growth potential.

Hopefully the Bank's forward guidance will encourage them to spend. In the meantime Dr Carney is right to be cautious.