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WHAT'S HAPPENING IN THE UNITED KINGDOM

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The Week Ahead ...
The Week Ahead

09:30 Mon 11 November - Producer Output Prices (Oct). The recent good news on producer prices is expected to continue into October. The headline figure is forecast to have risen by 0.2% month-on-month and by 2.2% year-on-year. Excluding the volatile (and at present high inflation) food, beverages, tobacco and petroleum sectors, the annual rate of increase will stay close to 0.9% - a 30-year low.

09:30 Mon 11 November - Producer Input Prices (Oct). There is a wide range of estimates of the rise in input prices this month, reflecting uncertainty about the extent that higher oil prices will be reflected in the figures. The consensus view is that prices will have risen 0.3% month-on-month, leaving them 1.8% lower than a year earlier.

09:30 Wed 13 November - Average Earnings (Sep). After last month's surprise rise in the underlying rate of increase in average earnings to 4%, no change is expected this month.

09.30 Wed 13 November - Unemployment (Oct). A fall of 25,000 is expected in October's unemployment count. This is larger than the average fall so far this year, but smaller than September's 35,000 fall. The unemployment rate could have moved down to 7.3%.

09.30 Wed 13 November - Unit Wage Costs (Sep). August saw a leap in the apparent rate of unit wage cost inflation to 4.5%. This was based on implausible estimates of manufacturing productivity growth. If the ONS has sorted out this problem, this month's figure could be significantly lower.

09.30 Thurs 14 November - Retail Prices (Oct). There could be another disappointing inflation figure this month, with the underlying rate (excluding mortgage interest payments) moving up from 2.9% to 3.0%. The headline rate will almost certainly increase, perhaps from 2.1% to 2.4%, as last year's mortgage rate cuts begin to drop out of the calculation.

The Week Just Past

M0 grew by 7.5% in the year to October, up from an annual growth rate of 7.0% in September.

Manufacturing output increased by 0.3% in September, reversing the fall of 0.3% in August. In the third quarter output was 0.7% higher than in the previous quarter. Although the monthly data are erratic, the official data are now showing a moderate upward trend in output growth, confirming the picture that surveys have been hinting at for a few months.

The Bank of England's Inflation Report was a little more pessimistic than expected. The Bank still believe base rates will have to rise further to stem inflation pressures.

The latest CBI Distributive Trades survey showed demand on the High Street remains buoyant, and may well be getting stronger. Retail demand in October was the strongest recorded since 1988, orders placed to suppliers also continued their upward trend and retailers are increasing their stocks. Given the buoyancy of demand it is most unlikely that this stockbuilding is involuntary. Rather, retailers appear convinced that strong demand will be sustained for some time; they are expected a bumper Christmas.

Commentary

The latest M0 figures were slightly distorted by a large rise in bankers' balances - a small but volatile component of M0. The more meaningful notes and coin element of M0 showed an annual growth rate of 7.3% in October and 7.4% in September. M0 is a reasonable guide to the pattern of retail spending, and these figures show that spending growth is still buoyant. M0 growth is also well outside the Government's 0 to 4% monitoring range, as it has been since 1992.

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