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WHAT'S HAPPENING IN THE UK

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The Week Ahead ...
The Week Ahead

09:30 Mon 2 Sept-M0 Money Supply (Aug). Buoyant consumer spending is keeping M0 growth above the government's 0-4% monitoring range, and in July this measure of money supply was up 7.1%.

09:30 Mon 2 Sept-Purchasing Manager's Index (Aug). In July the main activity index rose modestly, up from 50.7 to 50.9, while the price index fell from 39.4 to 37.7, its lowest level since the survey began. The main index should stay above 50 for the third month, confirming the gradual recovery in the manufacturing sector. The price index should remain subdued, reflecting cost weakness in all sectors.

Tues 3 Sept-Halifax House Price Index (Aug). In July the index rose 0.5%, up 5.3% on an annual basis. Prices should continue to rise while affordability remains so good, and in prospect of continued income and employment growth.

Wed 4 Sept-UK Monetary Meeting. There is still a possibility that the Chancellor will cut interest rates a further 0.25% to capitalise on the improving 'feel good' factor, although even Clarke may now see the risks, (in terms of a booming consumer sector and a weaker currency), of easing too far.

11:30 Thurs 5 Sept-CBI Distributive Trades Survey (Aug). The survey remained at buoyant levels in July, with respect to both reported orders and expected sales. This positive trend should have continued in August.

09:30 Fri 6 Sept-Construction Output (Q2).

09:30 Fri 6 Sept-Industrial Production/Manufacturing Output (July). In June industrial production fell 1.1% on the month, while manufacturing output was down 0.3%. Second quarter GDP data showed stock levels at more manageable levels, a positive factor for renewed manufacturing sector activity in the months to come.

The Week Just Past

The latest set of trade data revealed a much healthier export picture than expected. The EU balance for June was barely in deficit at £28mn, with the result that the global deficit at £1.1bn came in well below market expectations (£1.4bn). There was also a substantial narrowing of the non-EU deficit in July to £0.5bn, less than half June's figure. Despite weak overseas markets exports are holding up well. However, imports are likely to grow more strongly in the coming months, as companies that have run down stocks increasingly meet demand from foreign output.

The Nationwide Building Society said house prices rose 1.7% in August, taking annual growth to 5.4%. Although it is sticking to its official forecast that prices will end the year 5.0% higher than in 1995, it is unofficially saying the rise will be slightly higher A spokesman said the low number of transactions remained disappointing, reflecting a shortage of higher quality property for sale. Supply shortages were said to be most pronounced in the South East, following the pattern of previous recoveries. The Nationwide forecasts house prices will rise by 6% in 1997 and 8% in 1998.

Commentary

Prior to the publication of the most recent trade data there were concerns that it would show that the consumer spending recovery had boosted import demand further, widening the trade gap.

However, in the event the data showed underlying export growth outstripping import growth and the trade gap narrowing. One explanation for weaker than expected import growth is the unwinding of excess stock holdings by domestic manufacturing companies.

Strong exports are more of a mystery, reflecting sustained export growth to a weak continental Europe.

In the longer term stronger consumer spending and investment will prevent a sustained improvement in the current account balance, although growth in Europe and in the US should also see export volumes grow further, limiting the deficit deterioration.

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