PSBR nerves hold back Footsie

An attack of nerves about figures for government borrowing due today and retail sales tomorrow prevented the FT-SE 100 index from passing the symbolic 4,000 level.

Shares in London, however, still managed to set another record, closing up just over 9 points at 3,977.2 in very light trading. But this week's economic statistics are expected to be less encouraging than the recent run of indicators pointing to rapid growth with low inflation.

Analysts expect today's figure for the public sector borrowing requirement in August to amount to more than pounds 4bn following a surprise repayment of pounds 1.7bn in July. And recent surveys suggest that official figures for retail sales last month will rebound.

The gap between government revenues and spending has been scarcely any lower this financial year than last year. The reason for the disappointing performance has been expenditure growth running at more than twice the rate needed to hit this year's target. Many City experts reckon this year's PSBR will exceed the Treasury's pounds 27bn forecast.

Yet the indications are that Kenneth Clarke, Chancellor of the Exchequer, is looking to cut more than pounds 3bn from existing spending plans to announce tax cuts in November's Budget. A freeze on the public sector pay bill for the fourth year running is also likely.

Leo Doyle, an economist at investment bank Kleinwort Benson said: "Existing plans are already really tough. When they take off another few billions in the Budget, it will be very difficult to deliver." He predicted that the PSBR would stick at pounds 29bn this year and next - the same as in 1995- 96.

Other City experts are more optimistic. Ciarn Barr at Deutsche Morgan Grenfell said: "Spending has slipped but I think they will manage to restrain it."

He also predicted that rapid growth in tax revenues, due to consumer spending picking up, would come as a pleasant surprise.

The financial markets are likely to remain on edge until after next Tuesday's meeting of the Federal Open Market Committee.

The risk of an increase in US interest rates can not be completely ruled out despite last week's unexpectedly low inflation figures.

Industrial production and capacity figures due today are known to be closely watched by the Fed. Analysts expect the year-on-year growth in output to fall to just over 3 per cent and would be alarmed by higher growth.

The Dow Jones industrials index was more than 36 points higher at 5,874.77 by late morning.

Suggested Topics
Start your day with The Independent, sign up for daily news emails
News
i100 In this video, the late actor Leonard Nimoy explains how he decided to use the gesture for his character
Arts and Entertainment
Secrets of JK Rowling's Harry Potter workings have been revealed in a new bibliography
arts + ents
News
Robert De Niro has walked off the set of Edge of Darkness
news The Godfather Part II actor has an estimated wealth of over $200m
Arts and Entertainment
Fearne Cotton is leaving Radio 1 after a decade
radio The popular DJ is leaving for 'family and new adventures'
ebooks
ebooksA special investigation by Andy McSmith
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

SThree: HR Benefits Manager

£40000 - £50000 per annum + pro rata: SThree: SThree Group have been well esta...

Recruitment Genius: Office Manager / Financial Services

£30000 - £37000 per annum: Recruitment Genius: Established in 1999, a highly r...

Jemma Gent: Year End Accountant

£250-£300 Day Rate: Jemma Gent: Are you a qualified accountant with strong exp...

Jemma Gent: Management Accountant

£230 - £260 Day Rate: Jemma Gent: Do you want to stamp your footprint in histo...

Day In a Page

HIV pill: Scientists hail discovery of 'game-changer' that cuts the risk of infection among gay men by 86%

Scientists hail daily pill that protects against HIV infection

Breakthrough in battle against global scourge – but will the NHS pay for it?
How we must adjust our lifestyles to nature: Welcome to the 'Anthropocene', the human epoch

Time to play God

Welcome to the 'Anthropocene', the human epoch where we may need to redefine nature itself
MacGyver returns, but with a difference: Handyman hero of classic 1980s TV series to be recast as a woman

MacGyver returns, but with a difference

Handyman hero of classic 1980s TV series to be recast as a woman
Tunnel renaissance: Why cities are hiding roads down in the ground

Tunnel renaissance

Why cities are hiding roads underground
'Backstreet Boys - Show 'Em What You're Made Of': An affectionate look at five middle-aged men

Boys to men

The Backstreet Boys might be middle-aged, married and have dodgy knees, but a heartfelt documentary reveals they’re not going gently into pop’s good night
Crufts 2015: Should foreign dogs be allowed to compete?

Crufts 2015

Should foreign dogs be allowed to compete?
10 best projectors

How to make your home cinema more cinematic: 10 best projectors

Want to recreate the big-screen experience in your sitting room? IndyBest sizes up gadgets to form your film-watching
Manchester City 1 Barcelona 2 player ratings: Luis Suarez? Lionel Messi? Joe Hart? Who was the star man?

Manchester City vs Barcelona player ratings

Luis Suarez? Lionel Messi? Joe Hart? Who was the star man at the Etihad?
Arsenal vs Monaco: Monaco - the making of Gunners' manager Arsene Wenger

Monaco: the making of Wenger

Jack Pitt-Brooke speaks to former players and learns the Frenchman’s man-management has always been one of his best skills
Cricket World Cup 2015: Chris Gayle - the West Indies' enigma lives up to his reputation

Chris Gayle: The West Indies' enigma

Some said the game's eternal rebel was washed up. As ever, he proved he writes the scripts by producing a blistering World Cup innings
In Ukraine a dark world of hybrid warfare and murky loyalties prevails

In Ukraine a dark world of hybrid warfare

This war in the shadows has been going on since the fall of Mr Yanukovych
'Birdman' and 'Bullets Over Broadway': Homage or plagiarism?

Homage or plagiarism?

'Birdman' shares much DNA with Woody Allen's 'Bullets Over Broadway'
Broadchurch ends as damp squib not even David Tennant can revive

A damp squib not even David Tennant can revive

Broadchurch, Series 2 finale, review
A Koi carp breeding pond, wall-mounted iPads and a bathroom with a 'wellness' shower: inside the mansion of Germany's 'Bishop of Bling'

Inside the mansion of Germany's 'Bishop of Bling'

A Koi carp breeding pond, wall-mounted iPads and a bathroom with a 'wellness' shower