Economic data shows signs of health for UK

PURCHASING manager’s surveys out this week are set to point to healthy UK economic growth, with improvements expected in the service, construction and manufacturing sectors.

Manufacturing data out today is forecast to show a small rise for May, the first increase in output since January.

Construction figures, due tomorrow, are likely to show modest contraction – but less of a slowdown in building than previous months. The index is predicted to edge up to 49.6 for May, considerably higher than the 40-month low of 46.8 in February and just under the 50 level which would show no movement.

On Wednesday the service sector will add to the positive economic news with clear signs of expansion.

Howard Archer, of IHS Global Insight, said: “We expect the business activity index to have edged up further to a nine-month high of 53 in May after rising to 52.9 in April from 52.4 in March and 51.5 in January.”

Meanwhile, the Halifax house prices survey, released today, is likely to show a rise of 0.3 per cent rise in UK house prices on the month, and 2.5 per cent on the year.

The Bank of England’s Funding for Lending scheme will also be in the spotlight today, as official figures are expected to show banks have reduced lending in the three months to March, despite the scheme’s subsidies.

Figures on Friday showed net business lending dropped nearly £3bn in April, after contracting £545m in March. Lending to smaller businesses shrank by £660m following a £115m drop in March.

On Thursday, both the Bank of England and European Central Bank are scheduled to make interest rate decisions.

“It is a close call as to whether the ECB delivers another refinance rate cut, despite the growing pressure applied now by the OECD. If not, expect Mario Draghi’s rhetoric to prepare the ground for a move in July,” said Ian Williams of Peel Hunt.

In the corporate calendar, the week begins with interim reports from Andor Technology and GW Pharmaceuticals and final figures from GB.

Tomorrow’s news includes end-of-year figures from Acal, Assura, BP Marsh, Sepura, Severfield-Rowen, Software Radio Technology, Tricorn, Vp and WYG and a trading statement from Wolseley.

On Wednesday API, Findel, First Property, Moss Bros, RPC, Synergy Health and Tesco will all update the market.

Johnson Matthey will release its full-year results on Thursday. Fuller Smith & Turner, Hornby and Kcom are set to give final figures on Friday while Bellway and SThree are set to give trading statements on the same day.