Shares make record gain on twin economic boost
Wednesday 19 August 1998
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
- 1 Finland schools: Subjects scrapped and replaced with 'topics' as country reforms its education system
- 2 The West has it totally wrong on Lee Kuan Yew
- 3 #FreeTheNipple: Women in Iceland bare breasts in solidarity with trolled student
- 4 Scientists have discovered a simple way to cook rice that dramatically cuts the calories
- 5 Zayn Malik quits One Direction: Hundreds of workers request compassionate leave following band member's exit
Germanwings captain Patrick Sondenheimer tried to break into locked cockpit door 'with an axe' as plane was descending
Amanda Knox murder conviction: Italian court overturns verdict for US student and Raffaele Sollecito in the killing of Meredith Kercher
Saudi Arabia says it won't rule out building nuclear weapons
The battle for the Middle East's future begins in Yemen as Saudi Arabia jumps into the abyss
#FreeTheNipple: Women in Iceland bare breasts in solidarity with trolled student
Nigel Farage brands LGBT activists 'filth' and 'scum' and accuses them of scaring away his children after they invade his local pub
Ukip supporters are 55 or older, white and socially conservative, finds British Social Attitudes Report
JK Rowling responds to fan tweeting she 'can't see' Dumbledore being gay
Russia threatens Denmark with nuclear weapons if it tries to join Nato defence shield
Jeremy Clarkson sacked live: Alan Yentob 'wouldn't rule out' ex Top Gear host's BBC return
Germanwings plane crash live: Co-pilot Andreas Lubitz wanted to 'do something people would remember him for'
iJobs Money & Business
Negotiable: Recruitment Genius: To provide a prompt, friendly and efficient se...
Negotiable: Recruitment Genius: You will be the first point of contact for all...
£18000 - £24000 per annum + benefits: Ashdown Group: HR, Payroll & Benefits Of...
£35000 - £38000 per annum + benefits : Ashdown Group: A highly successful, int...