BoE – Agents’ summary of business conditions
· Moderate rates of activity growth had continued overall. Retail sales volumes growth had eased. It was expected to slow further during the year ahead as the fall in sterling fed through to higher prices, reducing households’ purchasing power. In contrast, export volume growth had picked up. That was due to the fall in sterling and stronger world growth.
· Investment intentions had picked up, pointing to modest growth in spending in the year ahead. That reflected continued moderate demand growth and less uncertainty about economic prospects, particularly in the near term. But a lack of visibility of the United Kingdom’s future trading arrangements was weighing on longer-term plans for some contacts.
· The fall in sterling was being passed through into higher manufacturing output and consumer goods price inflation. Business and consumer services price inflation had edged higher.
Growth in the value of consumer spending had remained moderate. But retail sales volumes growth had eased. A survey pointed to a slowdown in consumer demand growth in the year ahead. That was concentrated in goods rather than services.
Business services turnover had grown moderately. Some contacts in the sector remained cautious about longer-term prospects.
Growth in manufacturing output remained modest. Some suppliers had benefited from increased domestic sourcing. The fall in sterling and a stronger world economy had led to a marked rise in export volume growth.
Construction output growth had changed little.
Investment intentions had picked up. That reflected continued steady demand growth and some reduction in uncertainty about economic prospects, particularly in the near term. A lack of visibility around the United Kingdom’s future trading arrangements continued to weigh on longer-term investment plans for some contacts.
Bank credit availability had remained stable. There had been a small pickup in the demand for loans. A targeted survey of companies suggested little change in the availability or cost of foreign exchange hedging products since the EU referendum.
Occupier demand for commercial real estate had remained resilient overall. That had driven some modest rental growth. But downward pressure was reported on rents on some properties in the City of London.
Housing market activity had been little changed. There were signs of gently rising demand for housing, outstripping the number of properties available for sale overall. Strong competition was reported in mortgage lending.
Capacity utilisation had risen in manufacturing alongside increased demand, and to a lesser extent in services. Slack in companies was close to normal overall.
Employment intentions pointed to very slight growth in staffing over the coming six months. Recruitment difficulties had increased and were moderately above normal.
Growth in labour costs per employee had remained subdued. Settlements were clustered around 2% to 2.5%.
Materials costs and imported finished goods price inflation had risen further. That was largely due to the fall in sterling.
Manufacturing output price inflation had risen sharply. Higher costs were being passed on to prices. Business services price inflation had edged higher, but it remained moderate.
Consumer goods price inflation had picked up markedly following the fall in sterling. Consumer services price inflation had edged up. That partly reflected continued steady demand growth.
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