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UK Industrial Orders Rise Sharply

James Boston
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UK Industrial Orders Rise Sharply

The Confederation of British Industry has announced a sharp rise in it’s Industrial Trends Total Orders indicator for the month of August. In what is a strong sign that the UK’s manufacturing sector has the potential to catch up to the rest of the economy in terms of growth the indicator this month came in at 11, easily beating analysts expectations for a reading of 4 and clearly topping the July level of just 2.

Earlier this morning the Bank of England (BoE) released the minutes of it’s most recent Monetary Policy Committee (MPC) meeting. Markets by now have become very used to the unanimity of the nine to nothing vote in favour of not altering monetary policy. Today however there was a surprise element as two officials, Martin Weale and Ian McCafferty, voted in favour of immediately raising the base rate from 0.5% to 0.75%. There was undoubtedly a surprise element to the 7 – 2 split among the MPC voting members but markets weren’t entirely caught off guard, there had been talk over the past month of certain members likely to use their vote to promote monetary tightening.

This slight dissention within the Bank’s policy making unit does not necessarily imply that an interest rate hike is likely to take place in UK before next year. The reasons noted by Weale and McCafferty for their tightening stance were that unemployment has been falling at an increasing pace and that data indicated that the slack was now evaporating from the labour market leading to wage inflation. It is worth noting however that between the recent MPC meeting where the vote was taken and today’s publication of the minutes further labour market data has been made available, this shows that Average Weekly Wages in fact fell by 0.2% in June, additionally general inflation has slightly softened.

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