Press Release Author: U.K. service industries from airlines to banks grew at the slowest pace in 4 1/2 years in October and manufacturing unexpectedly declined in September, adding to the case for a cut in interest rates. The pound fell.
Industry: Financial
Press Release Summary: U.K. service industries from airlines to banks grew at the slowest pace in 4 1/2 years in October and manufacturing unexpectedly declined in September, adding to the case for a cut in interest rates. The pound fell.
Press Release Body: An index of services declined to 53.1 from 56.7 in September, according to a survey of 700 companies by the Chartered Institute of Purchasing and Supply. Factory production fell 0.6 percent on the month, the Office for National Statistics in London said today. Growth in Europe\'s second-largest economy is poised to slow in 2008 after the Bank of England raised the benchmark interest rate five times in a year and corporate credit costs jumped. Economists expect policy makers to cut the benchmark rate, the highest among Group of Seven nations, early next year. ``This has put inflation risks out of the calculation,\'\' Trevor Williams, chief economist at Lloyds TSB Group Plc in London, said in an interview. ``In the next few months rates will be cut. We\'re looking for a cut in February.\'\' The pound extended its decline against the dollar. The U.K. currency fell about 0.2 percent after the report and traded at $2.0795 as of 12:38 p.m. in London, from $2.0893 late on Nov. 2, when it climbed to the highest since May 11, 1981. Services Weaken Services weakened more than predicted by economists. The median of 31 forecasts in a Bloomberg News survey was for a reading of 56. A reading above 50 indicates expansion. Growth in services, which account for three-quarters of gross domestic product, has put the U.K. economy on course for the fastest expansion since 2004. Manufacturing, about 15 percent of the economy, has also supported growth this year. The pace of economic expansion may slow to as little as 2 percent next year, from 3 percent in 2007, Treasury forecasts show. Higher borrowing costs and the fallout from a global credit squeeze that led to a run on Northern Rock Plc in September tame house-price gains, which have underpinned consumer spending. ``Without doubt, some of the big banks will see a reduction in their profits,\'\' Chancellor of the Exchequer Alistair Darling told the BBC Radio 4\'s Today program in London. ``Banks will be more cautious about lending and when it comes to revising some of the more foolish lending, such as in the U.S. subprime market, then that is no bad thing.\'\' LogicaCMG Sales U.K. insurer Legal & General Group Plc said Oct. 26 third- quarter sales fell after higher interest rates made home loans more expensive, trimming demand for mortgage-related insurance. LogicaCMG Plc, the Anglo-Dutch computer-services provider, lowered its full-year revenue growth forecast today, saying it failed to match key contracts from U.K. companies that boosted sales in 2006. Manufacturers are also finding it harder to compete in world markets as the pound\'s jump against the dollar makes U.K. exports more expensive. At the same time, record oil prices are squeezing profits margins. The drop in manufacturing was the second in three months. Economists expected output to rise 0.1 percent, according to the median of 30 forecasts in Bloomberg survey. ``The strength of the pound is hurting export prospects, and there are signs of cooler domestic demand,\'\' said Philip Shaw, chief economist at Investec Securities in London. ``This sector isn\'t as strong as it has been.\'\'
2022
