UK economic growth was stronger last year than had been expected, with annual growth now estimated at 3.2 per cent compared to the earlier consensus forecast of 2.7 per cent.
The upward revision was partially influenced by accelerated growth during Q4, where GDP increased by 0.7 per cent, up from 01/2 per cent in the previous quarter.
This was driven largely by an expansion of output in the services sector, which rose by one per cent against the previous quarter, led by business services, finance and transport.
There was also an upward revision to industrial production, and particularly manufacturing output, in the fourth quarter. Yet, while the figures were better than anticipated, there are clear signs that UK economic growth is moderating, and our main scenario remains confident that the economy will average growth of about 21/2 per cent in 2005.
This month, the Bank of England's Monetary Policy Committee (MPC) has decided to maintain interest rates at 43/4 per cent for the sixth consecutive month.
Although there has previously been some debate over a future cut in rates, analysts are now predicting the Bank will keep its base rate at 43/4 per cent throughout 2005.
The minutes from the last MPC meeting show that inflation has picked up somewhat quicker than anticipated, removing any possibility of a downwards move in rates.
A key factor in monetary policy is the performance of manufacturing, which continues to struggle against the pressure of higher interest rates, rising energy costs, the exchange rate and strong global competition. Evidence from recent economic surveys is mixed, but points to a decline in both orders and inquiries, with exports particularly affected. A report by the Chartered Institute of Purchasing and Supply and NTC Research shows manufacturing activity decreased to 51.8 in January, down from a revised 53.3 in December.
In contrast, growth in services has picked up speed, influenced by increased activity from business services, finance and transport. According to the CIPS / NTC Research purchasing managers index, service sector activity increased from 54.9 in December to 55.9 in January.
The survey also reported a positive outlook for the sector, with approximately threefifths of respondents anticipating an increase in activity during the next twelve months. The performance of retail (not included in the CIPS survey) was more mixed, with many reporting disappointing sales over the Christmas period. This appears to have been countered to some extent by stronger sales in January, as recent figures from the British Retail Consortium confirm sales were 31/2 per cent ahead of those in January last year in volume terms.
Turning to the tables, the insurer Britannic Group has moved up two places this month to take the lead in the super league table. Britannic is focused on becoming a major owner and administrator of closed UK life funds and is also developing its asset management products and pension plans.
Second place is maintained by Midlands brewer Wolverhampton & Dudley Breweries, which achieved a month end share price of 1076p.
The company's unconditional offer for Burtonwood plc has recently received valid acceptances of over 90 per cent in value of the Burtonwood ordinary shares.
Support services and construction business Carillion has strengthened its position, climbing up four places in this month's super league table. The business has continued to benefit from positive trading conditions in the second half of 2004, and full-year profit before tax, goodwill and exceptional items is expected to meet market expectations.
Order books remain strong and the outlook for future growth across its main markets is positive.
In the medium-sized companies table, the commercial property developer A& J Mucklow maintains its lead for a second month. After reporting strong full year results, the company has purchased a 50,000 sq ft distribution warehouse in Worcester for an estimated £2.35m.
The facility was simultaneously part-leased to the nonferrous metal products manufacturer KME ( UK) and Atchison Topeka, a distributor of food products.
Mail collection and delivery service provider Business Post Group retains second place for a fourth month. Interim results for the company showed continuing fast rates of growth in the HomeServe, Courier, International and UK Pallets businesses as well as a successful launch of UK Mail, with group profits up by 23 per cent to £109.9m. In December, Business Post signed an agreement with NCN Limited, which runs a national network of independent express parcel delivery firms.
Under the agreement Business Post will have access to both NCN's centrally-serviced customers and network members. Third position is occupied by the Hereford-based company Wyevale Garden Centres. The group reported strong trading over Christmas, with like-for-like sales up by 8.8 per cent in the ten weeks to January 2. Based on an improved second half, Wyevale expects profit before amortization of goodwill and exceptional items to be £221/2 million for 2005.
In the smaller shareleague category, the top three positions remain unchanged, with Widney in first position, followed by Loades in second place and FW Thorpe in third.
Widney, the designer and manufacturer of telescopic slides and windows for specialist vehicles, has reported its first quarter results are in line with expectations and are substantially ahead of the same period last year.
The Coventry-based engineering firm Loades, finished the month with a share price of 713p, marking a change of 146 per cent since April 1.
Its fellow runner-up, FW Thorpe continues to successfully drive its operations forward on a number of fronts and ended January with a month end share price of 388p.