OUTLOOK UK data set to support predictions of rates staying on hold
Friday, May 27, 2005 12:34:30 PM
afxpress.com
LONDON (AFX) - There will be enough economic evidence next week to ensure that interest rates in the UK will remain on hold at the next rate-setting meeting of the Bank of England, analysts said
They reckon that the data flow next week will continue to show consumption on the wane and the manufacturing sector displaying anaemic growth at best
In those conditions the Monetary Policy Committee will have no impetus to change its key repo rate from 4.75 pct at the following meeting on June 9, especially in light of its last economic projections in the May Inflation Report
The economic calendar kicks off on Tuesday -- there is no data on Monday due to a bank holiday in the UK -- with two gauges of consumption released
Both the surveys from GfK Martin Hamblin and the Confederation of British Industry are expected to show consumption continuing to grow but not at the heady rates experienced over the last couple of years
The GfK's main consumer confidence balance is expected to be unchanged at zero
"While confidence remains at these levels, it does not point to a collapse in consumer expenditure and we stand by our expectation of some acceleration over the rest of 2005, staving off rate cuts until 2006," said David Page, an economist at Investec Securities
Meanwhile, the CBI survey is expected to show the reported sales balance improving markedly from April's -14 to zero, but that is not indicative of a sector in rude health, analysts said
A similar picture is likely to emerge with Bank of England April lending data on Wednesday. Both mortgage lending and net consumer credit are expected to be little changed on the previous months
John Butler, economist at HSBC, said the mortgage approvals data in particular are not likely to be consistent, at least yet, with a collapse in the market
Mortgage approvals in April are expected to fall 1,000 from the previous month's 90,000, pushing net mortgage lending down slightly to 6.8 bln stg from 7.0 bln
"The message from this set of data should be more that demand for unsecured borrowing is slowing far faster than that for secured," he said
Butler expects net new consumer credit during the month to fall to 1.1 bln stg, way below market expectations of 1.6 bln stg, and March's 1.9 bln
Thursday's monthly house price survey from the Nationwide, the UK's largest building society, is also poised to show market activity steadying. Monthly house prices are expected to be relatively unchanged from the previous month
"Price stickiness has been in evidence in recent months as valuations have held up better than measures of underlying activity such as the number of new mortgage approvals or the number of completions," said Ross Walker, an economist at Royal Bank of Scotland
On the industrial side of the economy, the monthly PMI survey from the Chartered Institute of Purchasing and Supply on Wednesday is expected to show the manufacturing sector still in the doldrums |
