All eyes on the Bank but is giving credit all that is due?

A STRING of economic data is due over the next five days which, after a relative drought recently, are likely to impact investor confidence should there be any surprises.<br /><br />The Bank of England will be acutely aware of this ahead of its interest rate decision on Thursday. With most economists predicting the central bank to keep its lending rate frozen at 0.5 per cent, any movement here would be highly incendiary, and is therefore unlikely.<br /><br />More interesting, however, will be any indication of the future for the Bank&rsquo;s quantitative easing (QE) programme. Last month, the Monetary Policy Committee voted unanimously in favour of extending the scheme by &pound;50bn &ndash; but some amongst them would have taken this extension further, by another &pound;25bn.<br /><br />Whether those individuals will get their wish remains to be seen, but it is important to remember that making the cash available is no guarantee of demand.<br /><br />In a note assessing the impact of the Bank&rsquo;s Asset Purchase Facility (APF) &ndash; part of QE which aims to increase the availability of corporate credit &ndash; Commerzbank analyst Peter Dixon said that data from the BOE&rsquo;s lending panel of six banks, which account for 65 per cent of the stock lending to businesses, suggest the value of gross lending to businesses fell in April relative to March.<br /><br />Dixon goes on to say that it would be a major surprise if credit demand had not suffered, &ldquo;given the magnitude of the collapse in demand across the whole economy, and the extent to which firms are cutting back on production&rdquo; and running down inventories.<br /><br />With the cost of credit failing to mirror a recent drop in the Libor, and consumer confidence still at an all time low, it is hardly surprising that business are a bit cagey about whether they need to borrow at all.<br /><br />So perhaps the question really is: now that the bank has led the horse to a lake full of water, what will it do to encourage it to drink? <br /><br />Other economic data due out includes today&rsquo;s manufacturing purchase managers index (PMI) for May and Thursday&rsquo;s service PMI, both of which are expected to show an improvement in line with last week&rsquo;s provisional euro zone data.<br /><br />Tomorrow will take the focus directly to the consumer, with consumer credit and secured lending figures for April both anticipated to be flat month-on-month.<br /><br />All eyes will be on Lloyds Banking Group on Friday, with the bank&rsquo;s annual general meeting and the deadline for shareholders to decide whether or not to participate in the group&rsquo;s &pound;4bn rights issue. Any shares not taken up by qualifying shareholders will then be sold off no lower than the offer price of 38.43p per share. Also on Friday, Carphone Warehouse releases its full-year results and the first clue as to whether the recent acquisition of Tiscali&rsquo;s UK assets will be immediately earnings enhancing as expected by management.