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The Week Ahead ...
The Week Ahead

11:30 Tues 22 October: CBI Quarterly Industrial Trends Survey. The survey is expected to show that business confidence improved again and that activity in the manufacturing sector is picking up. There is not expected to be any sign of inflationary pressures building in the industrial sector.

09:30 Wed 23 October: Retail Sales (Sep). Volumes are expected to have been flat last month, reflecting a downward adjustment in the level of clothing and footwear sales.

09:30 Fri 25 October: Preliminary GDP (Q3). The flash estimate of third quarter GDP is expected to show the economy's output rose by a healthy 0.8% q-on-q, 2.4% y-on-y. Within the output breakdown, the service sector momentum seen over the past year is expected to have been maintained by the recent strength of consumer demand, and agricultural output is expected to have bounced back following BSE-related weakness.

09:30 Fri 25 October: Global Trade Balance (Aug). The trade deficit has been steady at around £1.2bn per month. August may see a slightly smaller figure of around £1bn, reflecting the beneficial effects of rising oil prices.

09:30 Fri 25 October: Trade Balance ex EU (Sep). The non-EU deficit fell from £0.7bn to £0.5bn in August, reflecting a surplus on erratic items. September's deficit is expected to return to around £0.7bn.

The Week Just Past

Producer prices remained subdued in September. Although the recent surge in crude oil prices boosted input prices, falling non-oil commodity prices and stronger sterling partially offset this so that input prices rose only 0.3% m-on-m, down 2.9% on an annual basis. Output prices rose 0.4% in the month taking annual growth from 2.0% to 2.2%.

Unemployment fell by 36,000 in September and the unemployment rate fell from 7.5% to 7.4%. Underlying average earnings growth stood at 4% in August, the same as in July. Unit wage costs in manufacturing rose 3.7% 3m-on-yr in August, marginally down from 3.8% in July.

The biggest surprise was the sharp fall in unemployment, which comfortably exceeded the average 19,000 fall over the last six months. Although it is too early to describe the labour market as overheating, it will tighten further as economic growth picks up, increasing fears of rising wage and price inflation.

The PSBR stood at £3.4bn in September, marginally higher than the £3.3bn total in September 1995. The PSBR has been disappointing this year and the current cumulative total points to an overshoot of around £2bn relative to the Treasury Summer forecast.

M4 money supply grew 0.8% m-on-m in September, and the annual growth rate edged up to 9.8% (from 9.5% in August). Special factors that have been affecting M4, such as building society take-overs by banks, making it difficult to assess. However, the underlying strength of money supply in the UK is difficult to ignore and will be adding to general concerns about the build-up of inflationary pressures.

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