Bad figures to deepen gloom

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THE GLOOM that left the London stock market poised only points over its low for the year on Friday is set to deepen this week. Official figures are expected to show a sharp rise in unemployment and a further slide in manufacturing output.

On Friday, the FT-SE 100 Index briefly hit its 1992 trough of 2,348, and the decline could continue. The pound is set to come under fresh pressure if economic statistics confirm, as expected, that manufacturing industry is sliding back into recession. Despite suspected intervention by the Bank of England, the pound closed on Friday 0.18 pfennigs down at DM2.8267, close to its all-time low against the mark inside the European Monetary System.

'As long as only John Major and Norman Lamont rule out devaluation while everyone else is talking about it, the pound will remain weak,' David Cocker, currency economist at Chemical Bank, said.

Hopes that the increase in unemployment was abating are likely to be dashed by the July unemployment figure, also released on Thursday. A seasonally adjusted rise of 25,000 is forecast by City economists, representing a sharp acceleration from the 7,000 rise in June.

Evidence of waning consumer confidence is likely to emerge in the June consumer credit figures. Outside forecasts put the decline in the amount of credit outstanding to consumers as deep as pounds 100m, compared with a pounds 19m decline in May.

Despite the weak state of domestic demand the annual rate of inflation in July, released on Friday, may edge up slightly to 4.1 per cent from 3.9 per cent in the previous month, because a sharp fall in mortgage rates and seasonal food prices a year earlier drops out of the annual comparison.