British spending at highs before attacks

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The Independent Online

Britain's economy entered September with a booming housing market, strong consumer and state spending, manufacturing in recession and a deep trade deficit.

Britain's economy entered September with a booming housing market, strong consumer and state spending, manufacturing in recession and a deep trade deficit.

But none of yesterday's data gave any clue as to the effect on the UK from the terrorist attacks on the US.

The most up-to-date news came from the employers' group, the CBI, whose survey of manufacturers found order books had slumped to a two-and-a-half year low.

Sudhir Junankar, a senior CBI economist, urged the Bank of England to "stand ready" to cut interest rates again after Tuesday's surprise move. "The last thing [UK manufacturers] need now is a further deterioration in world trading conditions," he said.

This was echoed in figures showing world trade contracted in August, with exports to non-European countries slumping 4.5 per cent. But consumers continued to borrow money for home purchases and high street spending was unabated.

The amount lent by banks jumped to an all-time record of £11.4bn in August. "Fears over the direction of the economy seemed to have little influence on individuals' demand for borrowing in August," the British Bankers' Association said.

The Council of Mortgage Lenders said home loans surged to a record £16.7bn in August. The number of offers jumped 20,000 to 139,000 despite rising house prices.

The CML forecast a slowdown in the housing market. "If anything, the fallout ... of the terrorist attacks may tend towards slowing the market even more than we previously forecast," it said.

Meanwhile, government spending surged 9.2 per cent compared with August 2000.

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