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WHAT'S HAPPENING IN THE UK

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The Week Ahead ...
The Week Ahead

09:30 Mon 14 October - Producer Input Prices (Sept) A rise of 0.5% in input prices is forecast for September, in part due to higher oil prices. This will leave the annual rate of increase unchanged at 2.2%, confirming the indications from the purchasing managers survey that input price inflation has bottomed.

09:30 Mon 14 October - Producer Output Prices (Sept) Output prices are expected to have been little changed in September. If so, the annual rate of increase will fall to 1.8%, or 0.8% excluding food, beverages, tobacco and petroleum. On this basis underlying output price inflation is the lowest recorded since 1967.

09:30 Wed 16 October - PSBR (Sept) After last month's disappointing PSBR figure, the chancellor will be looking for a considerable improvement to help him justify having scope for tax cuts in November's budget. The market expects a figure of £3bn.

09:30 Wed 16 October - Unemployment (Sept) Unemployment is expected to have maintained its recent rate of decline in September with a 15,000 to 20,000 reduction. This may be sufficient to see the rate of unemployment ease to 7.4%, from 7.5% in August.

09:30 Wed 16 October - Average Earnings (Aug) The underlying rate of increase in average earnings is expected to have remained unchanged at 3.75%.

09:30 Wed 16 October - Unit Wage Costs (Aug) The trend rate of increase in unit wage costs might fall from 3.7% in July to 3.5% in August.

09:30 Fri 16 October - M4 Money Supply (Sept) The chancellor welcomed a fall in the annual rate of M4 growth to 9.0% (right at the top of the 4% to 9% monitoring range) in July as a sign that inflation pressures were not as great as some, including the Bank of England, feared. The rise to 9.4% in August will, therefore, have been disappointing, as will the fact that the market expects a further increase to 9.6% in September. If this proves correct it will add to the pressure on the chancellor to increase base rates.

The Week Just Past

Manufacturing output declined by 0.3% in August, and was 0.9% below its level in August 1995. This was unexpected given the stronger readings from the purchasing managers survey and the CBI industrial trends survey throughout the third quarter. It is possible that manufacturers took advantage of the summer holidays to reduce inventories further.

The minutes of the monthly monetary meeting between the governor of the Bank of England and the chancellor held on September 4th show that Eddie George would be happier if base rates were a little higher, while Kenneth Clarke seems to be leaning towards lower rates.

Retail prices increased by 0.5% in September, leaving the annual rate of increase unchanged at 2.1%. Excluding mortgage payments prices also increased by 0.5% month-on-month, but the annual rate of gain rose to 2.9%.

The CBI's Distributive Trades survey for September showed retail spending remained strong, though not as strong as in August, when sales boomed. Retailers' stocks are now at their lowest level, relative to output, for 13 years and, as a result orders have increased to their highest level for 8 years.

The FT-SE 100 index recorded new highs in the early part of the week before falling back a little on weakness in international equity markets.

Mhairi Mackelworth, AMP Asset Management.

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