The Week: Birmingham or bust

Birmingham or bust

A midnight drive from Birmingham to London revealed a beautiful sight. The M1 was heaving with lorries.

My wife Judy, a far more useful member of society than I am, was in Birmingham to receive this year’s award as top cancer journalist on Tuesday evening. On the journey up in the afternoon the M1 was busy but never blocked. What was interesting was the steady stream of goods vehicles heading in both directions after we joined the motorway around 11.30pm.

No doubt it makes sense to send cargo at night when traffic is less congested and City unloading restrictions are off. However, it is a sign that the recession is not as deep as many economists feared and it helped to offset my visit to the ExCel Centre in London last Saturday.

Instead of looking like a giant aircraft hanger, as it usually does, the ExCel had the air of a morgue.

For those who have not seen it, the centre has quite rightly been plonked way out in east London, just north of the Thames, in splendid desolation. It is a soulless place at the best of times even when it is heaving. On Saturday there was one finance show and two gospel meetings. God 2, Mammon 1.

You could tell that God is winning more matches than Mammon at the moment as he had by far the better crowds.

Otherwise the whole place had its shutters down. Last year at the same time there were any number of shows and exhibitions going on. One conference adviser told me that other venues are suffering with spare capacity and that bookings by exhibitors are well down for those shows that are still being held.

Just when companies most need to be pushing their wares, that is when they are forced to cut back. The downward spiral may not have been too deep but has not yet run its full course.

It doesn’t figure

Official statistics continue to throw up conflicting signals. For the housing market, the news suggests recovery. UK house prices rose for the third consecutive month in September, although they are admittedly still much lower than they were a year ago.

The rise was 1.6% in September and 2.8% in the latest quarter, according to the Halifax, which cited increased demand and lack of supply.

For the motor industry, the situation is less clear. Sales of new cars were 11.4% higher than in September 2008 but figures were boosted by the car scrappage scheme. This £2,000 enticement has been extended but will presumably come to an end within the next few months. In any case, its impact is likely to lessen now the first rush to take advantage has passed.

The bleak news comes from manufacturing, which was supposed to be getting a boost from the weak pound. Industrial output fell 2.5% in August and while there seems to have been some shifting forward of production to July followed by factory closures for maintenance in August, this explanation does not sound wholly convincing.

The idea that the UK will start to run up a trade surplus thanks to the devaluation of the pound looks increasingly fanciful. Weak currencies are the symptom of a deeper problem, not a cure.

Bank in a bind

With so many uncertainties hanging over the economy, it is hardly surprising that the Bank of England chose to maintain the status quo at its monthly meeting this week. Bank Rate remains at 0.5% - it would certainly have been a shock if interest rates were changed at this stage – and the quantitative easing spending limit remains at £175 billion.

There is no great rush for the bank’s monetary policy committee to decide what to do over quantitative easing. It can slow down or speed up the rate at which it dispenses the cash while those conflicting signals on the economy make it hard to decide whether the policy is actually having any effect.

Some economists believe that a decision on whether to extend or suspend the programme will come in November. That makes sense, for that is a month in which the bank will be issuing its quarterly inflation report, which will make interesting reading to say the least.

While input prices – the cost of raw materials and fuel bought by manufacturers – were 6.5% lower in September than they were 12 months earlier, the prices of goods leaving the factory gates were up 0.5% year on year after shooting up 0.4% in the latest month.

My suspicion is that governor Mervyn King, who wanted to take the quantitative easing ceiling up to £200 billion, will get his way but possibly not until December.