ECONOMIC NEWS 3 JULY 2015

In the middle of June the Office for National Statistics (ONS) reported that inflation, as measured by Consumer Prices Index (CPI), rose to 0.1 per cent in May, up from minus 0.1 per cent in April; the biggest contribution to the rise came from transport, notably air fares. The May Retail Prices Index (RPI) inflation, a separate measure which includes housing costs, was 1.0 per cent, up from 0.9 per cent in April.

Meanwhile, the June minutes of the Bank of England’s Monetary Policy Committee revealed another unanimous vote to hold the interest rate at 0.5 per cent and maintain the size of the Asset Purchase Programme at £375 billion.

More recently the ONS confirmed that the economy grew by 0.4 per cent in the first three months of the year compared to an earlier estimate of 0.3 per cent. The ONS recently revised its methodology for measuring construction output, which has resulted in the revised estimates of overall growth. The annual growth to March was also revised upwards from 2.5 per cent to 2.9 per cent. For 2014 as a whole, economic growth was revised upwards to 3.0 per cent, the fastest pace of growth experienced since 2006.

A recent Markit survey indicates that business activity in the Eurozone rose at its fastest pace in four years in June, apparently boosted by higher spending by consumers and businesses. It suggests a second-quarter economic growth of 0.4 per cent, despite concerns over the possible exit of Greece from the Eurozone.

Markit’s June survey of the construction industry shows that activity grew at its fastest pace since February with residential house building continuing to be the fastest growing area. The survey also reports that confidence in the sector concerning the coming 12 months is at its highest for 11 years. Nearly two-thirds of construction companies envisage a rise in activity resulting from increased investment spending among developers and a robust demand for new residential projects. The survey also found that construction firms are hiring staff at the fastest pace in six months.

The newly released Markit survey of the services sector shows that it strengthened in June, more than expected by analysts, although growth in the manufacturing sector slowed to its lowest pace for more than two years.