Pressure on the Bank of England to announce a further round of quantitative easing in the UK lessened yesterday. With the Bank's Monetary Policy Committee due to announce its latest decision on QE at noon today, the first indications of economic growth in the fourth quarter suggested a continued, if slower, pace of recovery than seen in the previous six months.
The Chartered Institute of Purchasing and Supply (Cips) said its surveys of the manufacturing, construction and services sector, which cover the bulk of the economy, indicated a "lower risk of renewed downturn" and the equivalent of a quarterly growth rate of 0.4 per cent in October, the second successive month of improvement.
Exports are emerging as a major driver of growth for the recovery, part of the sought-after "rebalancing" of the UK economy.
While far from the double dip feared by the most pessimistic, the economy is still experiencing a slow-down on the 0.8 per cent and 1.2 per cent rates of growth in the third and second quarters, respectively.
Services displayed a higher than expected pick-up in October, the Cips said. Its poll complements upbeat signals from manufacturing and shows that business confidence among service sector managers is running at a four-month high. The index reading of 53.2 is up from 52.8 in September: any reading above 50 points to future expansion, but it is some way below its historic norms.
The Bank may also be concerned at evidence of inflationary pressures building. Higher global energy and commodity prices are adding to input costs, says the Cips, and are being at least partially passed on to consumers.
Costs for service firms accelerated to a five-month high in October.
David Kern, the chief economist at the British Chambers of Commerce, said: "While it would be understandable for the MPC to leave the quantitative easing programme unchanged, a further increase must remain under serious consideration.
"The risks of a setback remainserious, and every effort must be made to minimise the dangers of a new downturn."Reuse content