Mixed signals from UK economy indicators

With the CBI reporting that retail sales in September grew at their fastest rate for five years in addition to other important indicators revealing a fall in activity in the service sector, the UK economy is showing signs of further fragmentation.

Just over half of the retailers included in the CBI survey reported a rise in sales during the September period. Groceries, footwear and leather goods, specialist foods and household goods buoyed up the retail sector, which appears to be showing little signs of a decrease in consumer confidence.

However, a report out on Wednesday revealed that the UK service sector had experienced a slowdown for the first time in almost three years. A Chartered Institute of Purchasing and Supply (CIPS) report highlighted that the private service sector, which had until recently been buoyant, had seen a downturn in the wake of the terrorist attacks on the US. Various non-retail sectors, such as transport, hotels, and restaurants, had all experienced a recent decline in activity.

Contrasting with a report earlier in the week from the Nationwide that indicated that house prices were continuing to rise, a report by the Halifax, the UK’s largest mortgage lender, revealed that house prices rises had stalled last month. Both reports agreed that a slowdown in house price rises was on the cards as part of a general economic downturn.

On Tuesday the US Federal Reserve made a 0.5 per cent cut in interest rates to held hold up the flagging US economy. The cut took the US interest rate to a 40-year low of 2.5 per cent.

The Bank of England Monetary Policy Committee MPC is to meet on Wednesday, October 3, to decide on the UK interest rate. The MPC’s decision on UK interest rates will be announced on Thursday, October 4. (SP)