Industry leaders fear soaring pound will lead to higher rates

Industry leaders yesterday voiced renewed concern over the strength of sterling as the pound rose to its highest level for 34 months amid speculation that the Chancellor, Kenneth Clarke, will have to raise interest rates again soon.

Meanwhile, new economic data released yesterday provided further support for the wager in the markets that base rates are set to go up with both money supply and demand for manufactured consumer goods growing strongly in November.

Both the money supply and the demand for manufactured consumer goods grew strongly again in November, showing that the consumer boom is continuing to swell and putting pressure on Kenneth Clarke to make a pre-emptive strike against inflationary pressures.

Sterling briefly passed the DM2.60 level before falling back slightly to DM2.5975 - still its strongest showing since February 1994. Meanwhile it rose by 0.5 to 94.5 on the trade-weighted index.

The Confederation of British Industry said: "The message increasingly coming back from our members is that the strength of the pound is very worrying and will increasingly jeopardise our export competitiveness."

Alan Armitage, chief economist at the Engineering Employers Association, said: "Clearly sterling's appreciation is going to make life harder in export markets. Manufacturers like the competitive edge that a lower currency brings and any appreciation in the pound will hurt."

He said, however, that it was too early to say whether the level of new orders was being affected while many exporters were already well- hedged against the stronger pound.

In the markets there seemed little end in sight to the pound's surge.

"Everybody loves sterling," said Joe Prendergast, currency strategist at Merrill Lynch. Speculators are betting that Mr Clarke will have to raise interest rates soon because economic growth and inflationary pressures are rising.

The Chartered Institute of Purchasing and Supply (CIPS) reported in its latest survey yesterday that the stronger pound had dampened overseas demand for certain goods as export prices rise.

However, the stronger pound also makes it cheaper for manufacturers to import components and raw materials - many of which are priced in dollars - thus helping to offset the effect on exports.

Despite the pressures on exporters, demand for British manufacturing in other areas remains strong. The Purchasing Managers' Index, produced by the CIPS to reflect the state of activity in the manufacturing sector, remained roughly stable at 54.4, compared with 54.5 in October.

Meanwhile, rising domestic demand is more than compensating for any squeeze on orders from abroad - particularly consumer demand. The CIPS index for output and new orders among manufacturers of consumer goods showed the sharpest rise of any sector.

Manufacturers of investment goods, on the other hand, saw new orders (for new plant and machinery) slow considerably in November, reflecting continued business reluctance to invest.

Adam Cole of HSBC James Capel said the figures showed that "growth remains heavily skewed towards consumers rather than investment. Given that the Budget shifted the tax burden away from consumers and onto businesses, this is bad news for medium-term growth".

Figures from the Bank of England on the money supply reinforced the evidence of strong consumer spending. MO, which shows the amount of notes and coins in circulation, grew by 7.5 per cent in the year to November, up marginally on the 7.4 per cent in the year to October.

This is far above the Government's monitoring range for M0 of 0-4 per cent.

Suggested Topics
News
people
Arts and Entertainment
Joel Edgerton, John Turturro and Christian Bale in Exodus: Gods and Kings
film Ridley Scott reveals truth behind casting decisions of Exodus
News
people
Sport
footballArsenal 2 Borussia Dortmund 0: And they can still top the group
PROMOTED VIDEO
Arts and Entertainment
An unseen image of Kurt Cobain at home featured in the film 'Kurt Cobain: Montage of Heck'
filmThe singers widow and former bandmates have approved project
News
Andy Murray with his girlfriend of nine years, Kim Sears who he has got engaged to
peopleWimbledon champion announces engagement to girlfriend Kim Sears
Arts and Entertainment
Jake Quickenden and Edwina Currie are joining the I'm A Celebrity...Get Me Out Of Here! camp
tv
Arts and Entertainment
George Mpanga has been shortlisted for the Critics’ Choice prize
music
News
Albert Camus (left) and Jean-Paul Sartre fell out in 1952 and did not speak again before Camus’s death
people
Arts and Entertainment
Roisin, James and Sanjay in the boardroom
tvReview: This week's failing project manager had to go
News
ebooksNow available in paperback
News
Ed Miliband visiting the Holocaust museum in Jerusalem. The Labour leader has spoken more openly of his heritage recently
newsAttacks on the Labour leader have coalesced around a sense that he is different, weird, a man apart. But are the barbs more sinister?
Arts and Entertainment
'Felfie' (2014) by Alison Jackson
photographyNew exhibition shows how female creatives are changing the way women are portrayed in advertising
News
i100
Life and Style
Fright night: the board game dates back to at least 1890
life
Environment
The vaquita is being killed by fishermen trying to catch the totoaba fish, which is prized in China
environmentJust 97 of the 'world's cutest' sea mammals remain
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Langley James : IT Support; Helpdesk, VMware; Manchester, £18k

£16000 - £18000 per annum: Langley James : IT Support; Helpdesk, VMware; Manch...

h2 Recruit Ltd: Business Development Manager - HRO - £70k+ ote

£35000 - £450000 per annum + £3k car, £70k ote: h2 Recruit Ltd: Do you want to...

Citifocus Ltd: Newly Qualified Accountants - Risk Mgmt

£Attractive Package: Citifocus Ltd: Prestigious financial institution seeks to...

Citifocus Ltd: Operational Risk Analyst

£Negotiable: Citifocus Ltd: Experienced operational risk professional with ban...

Day In a Page

Cameron, Miliband and Clegg join forces for Homeless Veterans campaign

Cameron, Miliband and Clegg join forces for Homeless Veterans campaign

It's in all our interests to look after servicemen and women who fall on hard times, say party leaders
Millionaire Sol Campbell wades into wealthy backlash against Labour's mansion tax

Sol Campbell cries foul at Labour's mansion tax

The former England defender joins Myleene Klass, Griff Rhys Jones and Melvyn Bragg in criticising proposals
Nicolas Sarkozy returns: The ex-President is preparing to fight for the leadership of France's main opposition party – but will he win big enough?

Sarkozy returns

The ex-President is preparing to fight for the leadership of France's main opposition party – but will he win big enough?
Is the criticism of Ed Miliband a coded form of anti-Semitism?

Is the criticism of Miliband anti-Semitic?

Attacks on the Labour leader have coalesced around a sense that he is different, weird, a man apart. But is the criticism more sinister?
Ouija boards are the must-have gift this Christmas, fuelled by a schlock horror film

Ouija boards are the must-have festive gift

Simon Usborne explores the appeal - and mysteries - of a century-old parlour game
There's a Good Girl exhibition: How female creatives are changing the way women are portrayed in advertising

In pictures: There's a Good Girl exhibition

The new exhibition reveals how female creatives are changing the way women are portrayed in advertising
UK firm Biscuiteers is giving cookies a makeover - from advent calendars to doll's houses

UK firm Biscuiteers is giving cookies a makeover

It worked with cupcakes, doughnuts and macarons so no wonder someone decided to revamp the humble biscuit
Can SkySaga capture the Minecraft magic?

Can SkySaga capture the Minecraft magic?

It's no surprise that the building game born in Sweden in 2009 and now played by millions, has imitators keen to construct their own mega money-spinner
The King's School is way ahead of the pack when it comes to using the latest classroom technology

Staying connected: The King's School

The school in Cambridgeshire is ahead of the pack when it comes to using the latest classroom technology. Richard Garner discovers how teachers and pupils stay connected
Christmas 2014: 23 best women's perfumes

Festively fragrant: the best women's perfumes

Give a loved one a luxe fragrance this year or treat yourself to a sensual pick-me-up
Arsenal vs Borussia Dortmund: Alex Oxlade-Chamberlain celebrates century with trademark display of speed and intuition

Arsenal vs Borussia Dortmund

The Ox celebrates century with trademark display of speed and intuition
Billy Joe Saunders vs Chris Eubank Jnr: When two worlds collide

When two worlds collide

Traveller Billy Joe Saunders did not have a pampered public-school upbringing - unlike Saturday’s opponent Chris Eubank Jnr
Homeless Veterans Christmas Appeal: Drifting and forgotten - turning lives around for ex-soldiers

Homeless Veterans Christmas Appeal: Turning lives around for ex-soldiers

Our partner charities help veterans on the brink – and get them back on their feet
Putin’s far-right ambition: Think-tank reveals how Russian President is wooing – and funding – populist parties across Europe to gain influence in the EU

Putin’s far-right ambition

Think-tank reveals how Russian President is wooing – and funding – populist parties across Europe to gain influence in the EU
Tove Jansson's Moominland: What was the inspiration for Finland's most famous family?

Escape to Moominland

What was the inspiration for Finland's most famous family?