[A-List] UK eurozone membership

["Michael Keaney" <michael.keaney@xxxxxx>]

This will do wonders for the euro campaign, as exporters realise that it's
now much more difficult to sell stuff across the Atlantic, whilst
Europe-bound sales mushroom. Meanwhile UK interest rates rise in order to
calm an out of control housing market, whilst EU and US interest rates
remain flat.

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Pound hits 11-year high against dollar
Surge in factory output; Think-tank urges rise in rates; Housing market
shows no sign of slowing
By Philip Thornton, Economics Correspondent
The Independent, 09 December 2003

Sterling yesterday vaulted to its highest level against the dollar since the
pound was thrown out of the European exchange rate mechanism 11 years ago as
fresh evidence pointed to a healthy economic rebound.

An unexpected recovery for both manufacturers' output and prices, together
with a further jump in house prices, underlined a recent raft of figures
raised hopes of a solid recovery for the British economy.

Traders rushed to buy sterling as they bet the Bank of England would
continue to push interest rates higher while the central banks of the United
States and the eurozone sat on their hands.

The pound hit $1.7363 against the dollar, the highest since October 1992,
the month after Britain's failed attempt to keep sterling high enough to
stay in the ERM.

The National Institute of Social and Economic Research, a leading economic
think-tank, said the Bank would have to raise rates in the New Year. Its
snapshot estimate put economic growth for the three months to November at
0.9 per cent, indicating the economy was growing above its long-term trend
rate.

Martin Weale, its director, said the Bank should have raised rates last
week. "The UK economy is growing markedly faster than trend and the figures
point to the need for an early rise in interest rates towards marked
levels."

The markets were surprised by a monthly rise of 1 per cent in manufacturing
output in October, according to figures from the Office for National
Statistics.

This was the best month - excluding the distortions from the Golden
Jubilee - since August 2001 and was driven by a rebound in the "value added"
sectors of electronic and optical equipment, pharmaceuticals and aerospace.
Meanwhile prices charged by manufacturers rose at an annual rate of 1.7 per
cent in November, the biggest rise since March.

Analysts in the City said the figures meant the sector was no longer in
recession while more updates to survey evidence pointed to a further rise in
November. "October provided the first genuine signs that even the UK
manufacturing sector is starting to benefit from the improvement in global
demand," said John Butler, a UK economist at HSBC.

Simon Rubinsohn, the chief economist at Gerrard fund manager, said the
increase in prices, following last week's report of rising shop prices,
pointed to an "abatement of deflationary tendencies".

Meanwhile the Office of the Deputy Prime Minister said its new index showed
the price of the average home rose 1.8 per cent in October, taking the
annual inflation rate to 12.1 per cent from September's 11.0 per cent.
However there was contrasting gloom from the high street where separate
surveys indicated a slowdown in both numbers of shoppers and volumes of
sales.

The British Retail Consortium said retailers suffered their slowest November
since 1988, with like-for-like growth of just 0.9 per cent. Bill Moyes, its
director, said: "One of the wettest weekends over the past 100 years and the
Rugby World Cup played a role, but there is no escape from the fact that
consumer confidence remains extremely fragile."

FootFall, a research company, said the number of visitors to UK shopping
centres in the first week of December was 5 per cent down on the same week a
year ago.

The pound's surge was boosted by broader weakness in the dollar yesterday.
The euro surged to its seventh consecutive record high of $1.2223, extending
the dollar's decline on the year to almost 17 per cent.

The dollar has been undermined by fears the US cannot attract enough
overseas assets to offset its burgeoning current account deficit without a
fall in its currency.