UK economic data in coming week to add to rate hike expectations
Friday, April 16, 2004 5:13:45 PM
LONDON (AFX) - The coming week is forecast to bring more evidence as to why UK interest rates have to rise in May - with expectations indicating no sign of a letup in consumer spending while inflationary pressures creep up alongside strong overall economic growth. The week is predicted to kick off with sharp rises in raw material costs, due to higher oil prices and a slightly lower pound, although only a small amount of the increase is expected to be passed on to consumers
"In March, a combination of a lower exchange rates and rising oil and commodity prices, will, in our forecast, push up input prices," said RBoS economist Ross Walker
Survey evidence also suggests a small rise in output prices, he added
But while prices at the factory gate may be rising, analysts see the Bank of England's preferred measure of inflation - the Consumer Price Index - staying at benign levels and well below the Bank's 2.0 pct target. All forecasters polled by AFX News expect very little change. Deutsche Bank analysts who forecast a small decline in the annual level of the CPI to 1.2 pct, said the figure simply indicates how stable inflation has been over the last eight months
Elsewhere, the government's finances in March are expected to show a Public Sector Net Cash Requirement of 12 bln stg, taking the total for the fiscal year to just under 37 bln stg - short of the 43.7 bln stg figure predicted in last month's budget. In March 2003, PSNCR was at 11 bln stg while for the full fiscal year, the figure stood at 22.5 bln stg. Rounding off the week, the UK's overall economic position is expected to be strong with first quarter GDP growth estimated at an annual rate of 3.2 pct -the highest since the third quarter of 2000. But at this preliminary stage, figures are based on limited information and have recently been prone to subsequent upward revisions, John Butler, economist at HSBC said
"The key unknown is the service sector," he said, adding that he expects GDP to have risen 0.8 pct from the previous quarter. The weakness in the manufacturing sector is likely to have limited gains from the previous quarter, analysts said
"The disappointing pace of industrial production growth during Q1 - which runs contrary to more positive survey data - suggests that GDP has grown at a slower pace than that seen in the second half of last year," CSFB analysts said
The data heavy week is also laden with some key survey figures - among them the trio of borrowing releases from mortgage lenders - banks and building societies. Due out on Thursday, these will reveal whether housing market activity is continuing at elevated levels.
fxstreet.com
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Poor industrial growth
Low inflation
Yet the UK wants to add to the problems by strengthening the pound.
We will see.
I will guess no hike.
That housing bubble over there must really be something to be talking hikes like this.
M |
