Summary of business conditions largely positive

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The Bank of England's Agents' summary of business conditions points to largely positive economic conditions. Below is a short summary of the report.

Demand

Consumption: Retail sales fell in Jan but retailers are expecting modest sales growth in the next few months. Consumer service providers are also expecting moderate growth to continue in 2014.

Housing market: Overall activity has strengthened across the UK and house sales were well above levels seen a year ago. A shortage of properties is narrowing the gap between asking and selling prices.

Business investment: Investment intentions continue to strengthen and firms are more confident about the medium-term outlook for demand. Agents have noted increasing reports of investment in refurbishing or new commercial properties.

Exports: Euro area demand remains broadly flat but overall export growth has been reported to be steady and relatively broad based. Little impact on exports reported from recent appreciation of sterling.

Output

Business services: Growth has largely remained constant in business services.

Manufacturing: Output has continued to rise in the manufacturing sector and we have now seen three quarters of growth. Strong construction growth contributing to pick up in output of construction materials.

Construction: Growth has picked up further following a strong 2013 with house building driving much of this.

Employment

Employment has been edging up as productivity and economic activity has improved.

Costs and prices

Labour costs: Labour cost growth has risen moderately. Auto enrolment of pensions is contributing to upward pressure on labour costs.

Non-labour costs: Overall materials cost rises have fallen. Building aggregates and energy costs were the exception. Import cost inflation has fallen partially due to downward pressure from the sterling appreciation and weak euro-area demand.

Output prices and margins: Little change seen in output prices but some improvement seen in margins, although these remain below long-term averages.

Consumer prices: Pressure on consumer prices has eased further, largely reflecting lower goods price inflation. Pressure on disposable incomes also continues to squeeze inflationary pressures.

Author

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