Treasury seeks bigger picture

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The Independent Online
DIANE COYLE

Economics Correspondent

The Treasury and Bank of England are eager to develop new monthly statistics on Britain's services industries in order to get a better picture of the economy for policy purposes.

Although services are more difficult to monitor than manufacturing, economists at both the Bank and Treasury think the existing monthly statistics make commentators focus too much on manufacturing .

Manufacturing accounts for less than a quarter of GNP, compared to services' weight of almost two-thirds. Services output rose by 3.2 per cent in the year to the third quarter, compared to a 1.2 per cent rise in manufacturing output. But the weaker monthly manufacturing figures have set in motion a bandwagon in favour of interest rate cuts.

Speaking about the recent Inflation Report, Bank of England chief economist Mervyn King said: ``We shall be doing what we can to look at the service sector monthly rather than quarterly.'' The report said one uncertainty about the inflation outlook was the strength of demand, and whether the current slowdown was temporary.

Mr King said the sector of the economy best documented by monthly statistics happened to be the weakest. The divergence between weak manufacturing and strong services opened up in the fourth quarter of last year.

The growth in services during this recovery has been somewhat higher than those in the 1970s and 80s. One of the fastest-growing compared to previous recoveries has been transport and communications - up 5.4 per cent in the year to the second quarter - thanks to rapid expansion in telecommunications.

Michael Heseltine, the deputy prime minister, is also known to be interested in developing better information about the service sector, which encompasses important businesses and big overseas earners ranging from financial services and consultancy to music.

A Treasury spokesman said: ``There is a certain amount of interest here in seeing this work progress. It is important to get a broader view.''

The government's statisticians began work on improving services data 18 months ago. They do not have a firm timetable for completing it.

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