Shares make record gain on twin economic boost

FALLING INFLATION and healthier-than-expected public finances helped London shares to shrug off worries over President Clinton and Russia yesterday.

The FTSE 100 powered ahead, closing up 181 points at 5648.2 after official figures revealed that inflation fell in July for the second consecutive month. Separate data suggested that income tax self-assessment helped boost the Government's budget surplus.

Industry leaders renewed their calls for a rate cut after the Office for National Statistics (ONS) said headline inflation rate fell to 3.5 per cent in July from 3.7 per cent in June.

There was also a fall in the underlying inflation rate targeted by the Bank of England - so-called RPIX - which was down by 0.2 per cent to 2.6 per cent, just above the Bank's 2.5 per cent target.

City economists said a rate cut was unlikely until at least the New Year. Most forecasters - including the Bank of England - expect the rate of inflation to start to pick up again in the fourth quarter.

Francesca Massone at Goldman Sachs commented: "Until the MPC [Bank of England's Monetary Policy Committee] sees sufficient signs that the economy is slowing down, interest rates are likely to remain on hold."

The public sector net cash requirement (PSNCR) - the new name for the public sector borrowing requirement (PSBR) - stood at -pounds 5.4bn in July, meaning that the Government's budget was back in the black for the first time since April.

July's budget surplus was pounds 1.6bn higher than in July 1997, and beat market expectations by about pounds 0.8bn. Income tax revenues were up pounds 1.7bn on the year, partly because of the new self-assessment regime, according to City economists. VAT receipts were also higher than expected.

The public sector net borrowing requirement - which excludes gains from privatisation and is the Government's preferred borrowing measure - was -pounds 4.9 billion in July 1998, compared to -pounds 1.7bn in July 1997.

Stephen Byers, the Treasury's chief secretary, called the latest batch of economic data "encouraging". The Confederation of British Industry (CBI) said there was mounting evidence of a slowdown in the domestic economy which would see inflation reach the 2.5 per cent target this year.

Ian Fletcher, principal economic adviser to the British Chambers of Commerce (BCC) said: "These figures support our view that the time has come for the Bank of England to ease pressure on industry by cutting interest rates at its September meeting."

The inflation figures showed marked falls in prices for clothing and footwear, reflecting deteriorating conditions in the High Street, the ONS said. There was a slight pick-up in inflation in services.

Jonathan Loynes at HSBC Securities said: "Until such domestically-generated inflation shows convincing signs of easing, the Bank of England will continue to worry about the outlook for inflation."

Sterling closed at DM2.9055, up about 0.5 pfennigs.

Outlook, page 13

Start your day with The Independent, sign up for daily news emails
Arts and Entertainment
The teaser trailer has provoked more questions than answers
filmBut what is Bond's 'secret' that Moneypenny is talking about?
News
Johnny Depp is perhaps best known for his role as Jack Sparrow in Pirates of the Caribbean
peopleBut how did he break it?
Arts and Entertainment
Paul Walker and Vin Diesel in Fast and Furious 5
film
Sport
Lewis Hamilton secured his second straight pole of the season
f1Vettel beats Rosberg into third after thunderstorm delays qualifying
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
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

Recruitment Genius: Retirement Coordinator - Financial Services

Negotiable: Recruitment Genius: To provide a prompt, friendly and efficient se...

Recruitment Genius: Annuities / Pensions Administrator

Negotiable: Recruitment Genius: You will be the first point of contact for all...

Ashdown Group: HR, Payroll & Benefits Officer - Altrincham - up to £24,000.

£18000 - £24000 per annum + benefits: Ashdown Group: HR, Payroll & Benefits Of...

Ashdown Group: Learning and Development Programme Manager

£35000 - £38000 per annum + benefits : Ashdown Group: A highly successful, int...

Day In a Page

The saffron censorship that governs India: Why national pride and religious sentiment trump freedom of expression

The saffron censorship that governs India

Zareer Masani reveals why national pride and religious sentiment trump freedom of expression
Prince Charles' 'black spider' letters to be published 'within weeks'

Prince Charles' 'black spider' letters to be published 'within weeks'

Supreme Court rules Dominic Grieve's ministerial veto was invalid
Distressed Zayn Malik fans are cutting themselves - how did fandom get so dark?

How did fandom get so dark?

Grief over Zayn Malik's exit from One Direction seemed amusing until stories of mass 'cutting' emerged. Experts tell Gillian Orr the distress is real, and the girls need support
The galaxy collisions that shed light on unseen parallel Universe

The cosmic collisions that have shed light on unseen parallel Universe

Dark matter study gives scientists insight into mystery of space
The Swedes are adding a gender-neutral pronoun to their dictionary

Swedes introduce gender-neutral pronoun

Why, asks Simon Usborne, must English still struggle awkwardly with the likes of 's/he' and 'they'?
Disney's mega money-making formula: 'Human' remakes of cartoon classics are part of a lucrative, long-term creative plan

Disney's mega money-making formula

'Human' remakes of cartoon classics are part of a lucrative, long-term creative plan
Lobster has gone mainstream with supermarket bargains for £10 or less - but is it any good?

Lobster has gone mainstream

Anthea Gerrie, raised on meaty specimens from the waters around Maine, reveals how to cook up an affordable feast
Easter 2015: 14 best decorations

14 best Easter decorations

Get into the Easter spirit with our pick of accessories, ornaments and tableware
Paul Scholes column: Gareth Bale would be a perfect fit at Manchester United and could turn them into serious title contenders next season

Paul Scholes column

Gareth Bale would be a perfect fit at Manchester United and could turn them into serious title contenders next season
Inside the Kansas greenhouses where Monsanto is 'playing God' with the future of the planet

The future of GM

The greenhouses where Monsanto 'plays God' with the future of the planet
Britain's mild winters could be numbered: why global warming is leaving UK chillier

Britain's mild winters could be numbered

Gulf Stream is slowing down faster than ever, scientists say
Government gives £250,000 to Independent appeal

Government gives £250,000 to Independent appeal

Donation brings total raised by Homeless Veterans campaign to at least £1.25m
Oh dear, the most borrowed book at Bank of England library doesn't inspire confidence

The most borrowed book at Bank of England library? Oh dear

The book's fifth edition is used for Edexcel exams
Cowslips vs honeysuckle: The hunt for the UK’s favourite wildflower

Cowslips vs honeysuckle

It's the hunt for UK’s favourite wildflower
Child abuse scandal: Did a botched blackmail attempt by South African intelligence help Cyril Smith escape justice?

Did a botched blackmail attempt help Cyril Smith escape justice?

A fresh twist reveals the Liberal MP was targeted by the notorious South African intelligence agency Boss