Markets surge on upbeat industry and retail data
Friday 02 July 1999
The beleaguered industrial sector recorded its first expansion in 15 months, the survey from the Chartered Institute of Purchasing and Supply said.
Meanwhile the Confederation of British Industry said retail sales volumes rose last month at their fastest rate since May 1998. The stock market, which was already buoyed by Wednesday's 150 point gain following the decision by the US Fed to loosen its rate bias to neutral, rose further to close up almost 3 per cent.
The FTSE-100 closed at 6488.9 up 170.4 - its seventh largest ever points rise.
The pound rose on the surveys, which analysts said had lessened the chance of another cut in interest rates this year.
It rose almost a cent against the dollar to $1.5775 and more than half a penny against the euro to 64.96p while its weighted index surged to 104.5 from 103.9. The CIPS index, based on data from 620 industrial firms, rose to 50.4 in June from 49.4 the previous month on an index where any figure over 50 indicates expansion. The survey marks the end of the 15 months of unbroken contraction of manufacturing industry. It last rose above 50 in March 1998.
The institute said its indices on output, new orders and export orders all rose last month.
However, there was continued gloom for manufacturing workers as restructuring programmes resulted in a fall in employment for the 16th month running, albeit at its slowest rate for more than a year.
The survey said the recovery was uneven with growth in consumer goods and intermediate goods industries compensating for the decline in investment goods. The strong pound moderated the strength of export orders, it added. Roy Aycliffe, the institute's director of professional practice, said: "This is the best news the manufacturing economy has had for 15 months. At last we are seeing an expansion in activity buoyed by accelerating output and new orders growth."
The CBI's distributive trades survey showed 47 per cent of retailers reported increased sales, while 25 per cent said they were falling, giving a balance of 22 per cent, up from 11 in May. Optimism among retailers surged with a balance of 35 per cent forecasting higher sales this month against 20 per cent in June.
Again, the rises were unevenly spread with confectioners and clothing shops falling and sectors linked to the housing market, such as furniture and carpets, DIY, hardware and china stores growing.
Alastair Eperon, chairman of the DTS panel, said: "This is an encouraging sign but consumers still seem to be cautious and we have not yet seen a return to robust health."
Economist Richard Iley, of ABN Amro, said: "High street recovery and the end of manufacturing recession indicate that short rates have troughed. The data will leave the Monetary Policy Committee loath to cut rates further." David Coleman, of CIBC, said the falls in employment and prices showed there were few inflationary pressures in the pipeline.
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