Interest rate rise looms closer

THE prospect of a pre-Christmas rise in interest rates edged closer today after news that the manufacturing sector is growing at the fastest pace for more than a year.

The closely-watched CIPS/Reuters purchasing managers' report, regarded as a key barometer of the sector, also shows an influx of new orders has forced firms to hire staff for the first time since October 1999.

The report says: 'Firms reported that the origins of this latest growth were both domestic and international, driven in part by the competitive pricing of UK manufactured products at home and abroad.

'A key factor in this was the strength of the euro making domestically produced goods more competitive.'

The survey's headline purchasing managers' index registered 52.9 in September, up from 52.2 in August and above the 50 no-change level.

The news comes a day after official data revealed that the economy grew twice as fast as previously thought in the first and second quarters.

There was disappointing news from the High Street, however, with the CBI revealing that a net 17% of retailers reported higher sales in September than a year ago, against expectations of 28%.

Bank of England chief economist Charlie Bean sought to soothe fears about a looming consumer credit crisis and property market crash. He said it was unclear that borrowing and house prices had reached bubble proportions, adding that higher interest rates may not affect debt levels.