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Pressure on MPC to cut interest rates continues as sales slow

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  • 10/02/2003
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As Mortgage Solutions went to press, it was thought interest rates would remain at 4% although econo...

As Mortgage Solutions went to press, it was thought interest rates would remain at 4% although economic pressure on the Monetary Policy Committee (MPC) to cut rates is growing steadily.

The Confederation of British Industry’s Distributive Trades Survey shows orders placed with suppliers to be lower than a year ago. This is the first year-on-year decline in orders placed on suppliers for four years. over a third ‘ 38% ‘ of firms said orders were down.

Alastair Eperon, chairman of the survey panel, said: ‘The modest pick-up since Christmas cannot hide the underlying slowdown in sales growth and the fact that many retailers slashed prices to lure customers into the shops. These figures come at a crucial time when everyone is looking to see whether consumer spending can continue to prop up the economy.’

Meanwhile the Chartered Institute of Purchasing and Supply’s Purchasing Managers Index is at 48.6, showing industry in contraction for the second month running.

But not everyone is so downbeat. Laurence Sanders, economist at Bristol & West, said: ‘These surveys will be taken into account, but I expect base rates to remain at 4% throughout the spring and summer, largely because the Business Expectations Index remains at 70, suggesting confidence in the service sector.

‘Monetary policy is a crude weapon; while it can affect confidence, its effect can take 12 to 18 months to come through, so I see no reason for the MPC to move on the basis of these indices,’ he added.


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