BoE keeps rates at 0.5% as UK manufacturing surges

Last week's spotlight reverted to the UK, where the Bank of England left interest rates unchanged at 0.5% as was widely expected, and to the surprise of a few economic pundits, decided to stick to the current quantitative easing programme worth £175 billion.

Meanwhile, UK manufacturing output rose at its fastest monthly rate in one-and-a-half years, helped largely by an increase in car production. In fact, factory output rose 0.9% in July after it registered a revised increase of 0.6% in June.

British exports in July also rose at their fastest monthly rate since the start of 2008, as the value of UK exports rose 5% to £19.2 billion, while the value of imports rose by 3.5% to £25.7 billion.

Retail sales fell 0.1% last month for the first time since May, as cost-conscious consumers refrained from buying non-essential items.

In the US, initial jobless claims fell to 550,000 last week from a revised 576,000 previously. The data maintained expectations that the labour market is gradually improving, but remains very weak in historic terms.

Meanwhile, the US trade deficit rose sharply to $32 billion for July from a revised $27.5 billion the previous month, which was the highest monthly increase in a decade.

However, there was a sharp increase in exports and imports in July, which supported optimism over an improvement in economic conditions.

On Monday, the Federal Reserve published its 'Beige book', in which it created some degree of caution over the economy but also noted a gradual improvement in conditions.

In the Eurozone, economic data was relatively thin, with most of it coming from Germany, the area's largest economy.

The German economy registered a larger-than-expected 3.5% increase in factory orders in August, although the annual decline was still close to 20%.

There was also a surprising 0.9% drop in German industrial production in July after a revised 0.8% increase the previous month.

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