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The Week Ahead ...
The Week Ahead

09:30 Tues 18 Feb-Public Sector Borrowing Requirement (Jan). Whoever wins the forthcoming general election, more fiscal tightening is required to put the public finances back onto a sustainable path. January is a key month for tax receipts, specifically corporation and income taxes, and a debt repayment is expected. However, income tax revenues may be on the low side, reflecting the move to self assessment which has pushed the due date to the end of the month.

09:30 Wed 19 Feb-Retail Sales (Jan). Both the British Retail Consortium's survey and January's CBI's distributive trades survey suggested a modest pick-up in retail sales growth from December. The consensus expects a 0.2% rise in sales volumes on the month which, assuming no revisions, would raise annual growth from 2.9% to 3.8%.

09:30 Thurs 20 Feb-M4 Money Supply (Jan). There is expected to have been a rebound in money supply growth last month, with indications that repo activity accelerated strongly following December's pre-Christmas rundown. The consensus is expecting a 0.8% increase in the month, implying annual growth of around 9%.

00:30 Fri 21 Feb-CBI Industrial Trends Survey (Feb). Recent CBI surveys have shown falling export optimism but sustained overall output growth, with domestic demand for consumer goods remaining strong. This picture is unlikely to change in the short-term, and cost and price pressures should also remain subdued.

09:30 Fri 21 Feb-Q4 1996 GDP (First revision). The preliminary estimate put growth at 0.8% in the quarter and 2.6% in the year with the main boost coming from the service sector. There is not expected to be any revision to this initial figure.

The Week Just Past

Producer output prices rose 0.2% in January, up 1.5% on an annual basis. Underlying prices (ex food, beverages, tobacco & petrol) fell 0.1% in January, up only 0.7% in the year.

Producer input prices fell 0.5% in the month and were 6.2% lower than a year earlier, the lowest level for more than ten years. Subdued producer price inflation continues to reflect sterling strength, and the benefits are likely to continue for some months to come.

Unemployment fell 68,000 in January and the unemployment rate fell from 6.7% to 6.5%. Although the downward trend in unemployment is undoubted, there is some distortion from the introduction of the job seekers allowance, exaggerating the pace of decline.

Underlying average earnings growth was unchanged at a revised 4.25% in November, while unit wage cost growth fell from 4.0% to 3.2%. Within the average earnings data, manufacturing sector earnings growth picked up to 4.75%, while service sector earnings growth remained unchanged at 4.0%.

In its latest quarterly inflation report, the Bank of England said that sterling's rise would not have a long term impact on prices, and consequently did not eliminate the need for higher interest rates.

However, the report was less hawkish than expected, with some acknowledgement that sterling appreciationmay have had a greater role in reducing inflationary pressures than admitted in the November report. The Bank still views the strength of domestic demand, and in particular, a rapidly growing service sector, as a serious threat to the inflation target.

January's RPI data was slightly disappointing, with the headline rate rising from 2.5% to 2.8%, and the underlying rate, ex MIPs, unchanged at 3.1%. The headline rate was boosted by modest mortgage rate increases and last year's rate cut dropping out of the annual comparison. Meanwhile, lower goods-price inflation continues to be offset by rising service sector prices.

John Major has ruled out an early general election on 20 March, making 1 May, his preferred date, the most likely outcome.

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