Manufacturers will be hoping that healthier growth in the euro zone and a recently softer pound will increasingly feed through to give them with a significant boost in 2006.
The combination of rising unemployment, falling employment and muted earnings growth is hardly supportive for consumer spending or, for that matter, extended sharp house price increases.
Euro region labor markets are finally beginning to see genuine, if somewhat limited, improvement, boosted by the pickup in growth since mid-2005. Rising employment is key to boosting consumer spending across the euro region.
The sector may see modest expansion in the first quarter of 2006, having been a major drag on overall growth in the fourth quarter.
The slowdown in euro zone growth will not deter the ECB from raising interest rates in March and a further hike remains very likely in June.
The euro zone's upturn is still young and relatively fragile with significant question marks still hanging over the long-term strength of domestic demand.
This increased housing market activity has clearly led to some recent firming in house prices, and there is undeniably a risk that prices could move sharply higher over the coming months.
The limited correction in the Halifax house price index in January following the marked rises during the latter months of 2005 reinforces our strong doubts that house prices will see sustained sharp rises over the coming months.
If house prices start to accelerate markedly, we believe buyer interest will diminish, thereby keeping a lid on prices.
UK imports of goods excluding oil ... rose for a fourth successive month in February, and by substantial 4.5 percent, suggesting that domestic demand may have surprised on the upside in the first quarter.
Nevertheless, limited core inflation in January will not deter the ECB from hiking interest rates by a further 25 basis points on Thursday.
The evidence of marked improvement in the manufacturing sector further guarantees there will be no interest rate cut this Thursday. Indeed, we admit it is looking increasingly questionable whether interest rates will be trimmed further.
While the fourth quarter GDP data and the relatively healthy mix of the components further diminishes the chances of a near-term trimming of interest rates, we still believe a 25 basis point interest rate cut is very possible in May.
The latest data - including the improvement in manufacturing activity and current strength of the housing market - has increased the odds that the eventual next move in interest rates will be up.
This significantly reduces the prospects of any interest cut until at least August. Indeed, it increases the odds that the eventual next move in interest rates could be up.
We still believe UK interest rates will eventually be trimmed by a further 25 basis points, although not until August at the earliest.
We believe that interest rates will eventually come down by a further 25 basis points to 4.25.
Healthy mortgage lending data show that housing market activity extended its recent firmer performance in December. This is also borne out by the latest survey evidence consistently showing increased buyer interest.
Retail sales were significantly healthier than expected in September and August's sales were revised up, going a long way to killing off already fading hopes of a November interest rate cut.
The Nationwide data provides support for our long-held view that house prices will be unable to sustain sharp gains for some time to come.
This is likely to put a floor under house prices, but we remain highly doubtful that house prices will move substantially higher on a sustained basis any time soon. If house prices start to accelerate markedly, we believe buyer interest will soon diminish, thereby keeping a lid on prices.
The overall trade performance was dragged down by a fifth successive deficit in oil trade and a reduced surplus in services.
The minutes pour more cold water over the prospects for a near-term interest rate cut.
The consumer is the weak link in the European economic upturn story. We're past the worst, but it's hard to see a marked improvement in spending coming.
The GDP data (is) unlikely to be weak enough to prompt the MPC into cutting interest rates in November.
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