Newspaper article The Evening Standard (London, England)

'No Change' Looks Rate Bet but Calls Will Get Tougher

Newspaper article The Evening Standard (London, England)

'No Change' Looks Rate Bet but Calls Will Get Tougher

Article excerpt

Byline: JANE PADGHAM

THE Bank of England's monetary policy committee kicks off its first meeting of 2005 today with the prospect of interest rate cuts on the agenda for the first time since summer 2003. But the case for lower rates was not persuasive in December and the economic outlook has not deteriorated significantly since then.

The biggest concern for the MPC will be the housing market and the extent to which the slowdown will hit consumer spending. JANE PADGHAM assesses this and the other items on the MPC's checklist before it delivers its verdict at midday tomorrow.

House prices

Despite the surprise 1.1% bounce in property prices in December reported by the Halifax, most evidence points to a continuing slowdown of the housing market. Nationwide said prices dipped 0.2% in December, pulling the year-onyear rate of increase down to 12.7% - its weakest for nearly three years. With mortgage approvals at their lowest since 1995, further weakness lies ahead. The Bank will be praying the market can achieve a soft landing.

High Street spending

Deep discounts look to have saved retailers from a disastrous Christmas, but the British Retail Consortium claims the High Street still suffered its worst festive season for 10 years. Likefor-like sales were 0.4% lower than a year ago, according to the BRC, although a rival survey from the CBI painted a brighter picture. Christmas trading statements from retailers have been mixed, with Marks & Spencer and Next having a dismal time while New Look and Goldsmiths fared well.

Growth

Gordon Brown got an early Christmas present when the Office for National Statistics upgraded its third-quarter growth estimate. The economy is now thought to have expanded by 0.5%, rather than 0.4%, in the July-to-September period rather than 0.4% - still a sharp slowdown from the previous quarter's 0.9% growth.

Economists reckon growth picked up in the fourth quarter and will be reasonably strong at the start of 2005 before slowing later this year.

Manufacturing

Gloom surrounding Britain's troubled manufacturing sector is deepening. While official data on the sector have been relentlessly grim for months, previously upbeat survey evidence is starting to take a turn for the worse. …

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