Clarke set to clash with Bank
Tuesday 04 February 1997
Manufacturing activity bounced back in January despite the recent strength of the pound, and a jump in cash in circulation signalled buoyant retail spending. On the other hand, more manufacturers were cutting prices than raising them last month, while Halifax reported a dip in house prices.
The City expects Kenneth Clarke to continue to resist Eddie George's advice to raise base rates. Their meeting comes a week ahead of the publication of the Bank's quarterly Inflation Report, which is likely to cause irritation in the Treasury by insisting on the longer-term inflationary dangers if the economy's growth is not checked by a tighter interest rate policy.
Mr Clarke has continued to insist that there is not much difference between his views and the Governor's but the four-month disagreement has led the markets to conclude that politics has overtaken policy. "We expect base rates to remain on hold until the other side of the election," Adam Cole at James Capel said.
Bank of England figures reported a jump of 0.8 per cent in the amount of cash in circulation in January, the biggest rise since Euro 96 boosted spending in June. The increase is likely to signal strong consumer spending during the month, even though the link between cash and consumer spending can be erratic.
There was evidence that consumer demand is boosting manufacturing in the survey of purchasing managers in industry last month. The Chartered Institute of Purchasing and Supply (Cips) reported a strong surge in activity combined with falling prices. New orders - both domestic and export - rose faster than the previous month, but the advance in home orders was much bigger.
Output and employment also increased more quickly, the latter showing its biggest jump in nearly two years. "The pace of manufacturing activity is picking up," Peter Thomson, director-general of Cips, said.
But at the same time more manufacturers cut prices than raised them, thanks in large part to the effect of the strong pound on import prices.
A separate measure yesterday that will allow the Chancellor to downplay the inflationary dangers was news of a small drop in house prices. The Halifax's house price index fell 0.6 per cent after an unusually big 1.1 per cent increase in December.
Halifax said last month's fall was probably an adjustment for the previous month. The annual rate of house price inflation slowed from 8.4 to 7.1 per cent.
- 1 Revolutionary lost Caravaggio painting 'Mary Magdalen in Ecstasy' identified
- 2 McKamey Manor: This 'extreme' haunted house is the stuff of nightmares
- 3 Russell Brand says he will 'probably' give up acting to focus on his revolution
- 4 Watch what happened when food critics were unknowingly served McDonald's
- 5 David Beckham's Haig Club whisky is exactly what’s wrong with the Highlands
Renee Zellweger on plastic surgery rumours: 'I'm living a more fulfilling life and I'm thrilled that perhaps it shows'
Eleven members of same family hospitalised after eating deadly pufferfish
FCKH8: YouTube reinstates provocative anti-sexism video showing young girls swearing
Phone-hacking: The Piers Morgan connection - Mirror admits some stories during Morgan's tenure may have been obtained by illegal means
Russell Brand says he will 'probably' give up acting to focus on his revolution
Of course, teenage girls need role models – but not like beauty vlogger Zoella
Cameron is warned 'no possibility' of UK reducing immigration and that bid to bring in quota on migrant workers would be illegal
Support for EU membership 'at highest level since 1991' with most Brits wanting to stay 'in'
Thousands with degenerative conditions classified as 'fit to work in future' – despite no possibility of improvement
Attacks on 'Ukip Calypso' show how skewed people’s priorities are
Poppy Appeal 2014: This is why I won't be wearing a red poppy this year
iJobs Money & Business
£60000 per annum: Ashdown Group: Compensation and Benefits Manager - Compensat...
£30000 - £35000 Per Annum plus excellent benefits: Clearwater People Solutions...
£24000 - £28000 per annum + bonus & benefits: Ashdown Group: IT Business Syste...
£50000 - £90000 per annum + benefits: Ampersand Consulting LLP: Markit EDM (CA...