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Pressure to raise QE after mixed data

ANNUAL growth in broad money supply slowed to its weakest since 1999 in the second quarter, according to data released yesterday by the Bank of England, just two days before its monetary policy decision.<br /><br />The figures showed that broad money supply growth excluding intermediate other financial corporations such as pension funds, fell to 3.1 per cent in the second quarter from 3.8 per cent in the first. <br /><br />The lending and deposit figures showed that non-financial companies are not borrowing and are instead increasing their deposits held in the bank, indicating how credit-constrained many firms remain.<br /><br />However, while weak money growth will push the MPC towards more QE, recent indicators have showed signs of an improving economy.<br /><br />Yesterday&rsquo;s construction purchasing managers&rsquo; index indicated the slowest rate of contraction in 16 months, climbing to 47, with new construction orders expanding modestly in July for the first time since April 2008, while business expectations climbed to a 30-month high.<br /><br />Food inflation has dropped to its lowest level since December 2007, according to data from the British Retail Consortium out today. <br /><br />Overall annual shop price inflation was 0.5 per cent in July down from 0.7 per cent in June with food price inflation 3.8 per cent in July compared with 5.6 per cent in June. <br /><br />Meanwhile, the Nationwide consumer confidence survey will today say that confidence remained broadly stable in July, with consumers upbeat about future house prices. But this masked a large fall in spending confidence <br /><br />Three-quarters of consumers think that the current economic situation is bad while a third believe that it will have improved in six months time, Nationwide will say.