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WHAT'S HAPPENING IN THE UK

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The Week Ahead ...
The Week Ahead

Mon 23 September, (afternoon)-Monthly Monetary Meeting.

The Governor of the Bank of England will use August's surge in retail sales and acceleration of M4 money supply growth as reasons for policy restraint. (In the latest set of monetary meeting minutes he expressed a preference for higher base rates). However, the Chancellor would still like to see rates lower, and a 25 basis point cut, although unlikely, cannot be ruled out.

09:30 Tues 24 September-Q2 GDP (final estimate). The second estimate of Q2 GDP put growth at 0.4% q-on-q, 1.8% y-on-y. The final estimate is not expected to make any change to this figure.

09:30 Tues 24 September-Q2 Current Account.

09:30 Thurs 26 September-Non-EU Trade(Aug). July's non-EU trade data revealed a much healthier picture than anticipated, with the deficit of £0.5bn less than half June's figure. The consensus expects the deficit to have slipped back a bit last month, to about £0.8bn.

09:30 Thurs 26 September-Global Trade(July).

The EU balance for June was barely in deficit at £28mn, with the result that the global deficit of £1.1bn was well below market expectations. The consensus expects a further improvement in July, reflecting the better non-EU trade position. The consensus is forecasting s deficit of £0.8bn.

The Week Just Past

August's £4.5bn PSBR was marginally disappointing, largely explained by weaker VAT receipts than in August 1995. However, receipts in June and July were much stronger than in 1995, differences reflecting the 'front-loading' of VAT payments made by companies.

A cumulative PSBR of £13.4bn for the first five months of this financial year is £3.5bn lower than over the same period last year, on course for a full year outturn of £28bn to £30bn. Some creative accounting will be necessary in the November Budget if the Chancellor is to justify tax cuts.

Retail sales rose more strongly than expected last month, up by 1.0%, and taking annual growth to 4.4%. Retail sales data tends to be erratic on a month by month basis and comparisons using the latest 3 months of data is a more useful guide to the underlying trend. The rise in August takes 3m-on-3m growth to 1.5%, the strongest quarter of growth since Summer 1988.

The minutes of the July 30th Monthly Monetary Meeting show the Governor of the Bank of England was already worried about the inflationary implications of strong consumer spending. August's strong retail sales figures will fuel his concerns, and he is likely to recommend a rise in base rates at the next Monthly Monetary Meeting on Monday 23 September.

M4 money supply growth, at 9.4%, is once again outside the official 4-9% monitoring range, after a larger than expected increase in August. Supply was boosted by payments to N&P Building Society members, following its take-over by Abbey National.

The latest CBI Industrial Trends Survey shows the gradual recovery in manufacturing sector output continuing. Total orders improved, and stock levels fell.

The Royal Institution of Chartered Surveyors found that a net balance of 37% of estate agents said house prices increased during August compared with 32% in July. Agents have reported an improving market for 12 consecutive months since the low point last August, when a balance of 29% said prices were falling.

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