LONDON, Nov 1: Expectations of another British interest rate cut faded further on Tuesday as a series of reports ranging from manufacturing to house prices suggested that a struggling economy might be on the mend.

The biggest rise in UK property prices in 15 months reported by the Nationwide building society took financial markets by surprise, stoking speculation that market stabilisation may be morphing into a revival.

An unexpected acceleration in the Chartered Institution of Purchasing Management/NTC’s gauge of manufacturing activity also came as a surprise to analysts, given recent reports suggesting the nation’s factories were again struggling.

Together with a moderation in the pace of decline in retail sales and at least some hope among retailers polled by the Confederation of British Industry (CBI), some analysts have concluded that a rate cut remains some way off.

Today’s data will have strengthened the resolve of the MPC to hold policy steady when it meets next week, said Simon Rubinsohn, chief global economist at Gerrard, referring to the Bank of England’s Monetary Policy Committee.

UK Plc also appears to be shrugging off any worries about the economy. On Monday the FTSE 100 index of leading shares racked up its biggest one-day gain in 2-1/2 years on renewed bid fever.

Official figures on Tuesday showed British companies are in heavy demand. The value of foreign takeovers climbed to 12.3 billion pounds in the third quarter from 8.8 billion in the second.

Nationwide said house prices rose 1.3 per cent in October, taking the annual rate of house price inflation up to 3.3 per cent from 9-year low of 1.8 per cent in the prior month.

While it cautioned there was little room for a resurgence in the housing market given stretched valuations, the report came alongside an improvement in other measures of both property prices and turnover in the market after months of stagnation.

Indeed, it would appear that the BoE’s quarter point rate cut to 4.5 per cent in August — which was delivered with the narrowest of margins and against the will of BoE Governor Mervyn King — may have helped to re-invigorate the housing market.

House prices are erratic on a monthly basis. That said, these data provide some evidence that firmer housing activity may be starting to bolster prices, said Ian Stewart, economist at Merrill Lynch.

But a stagnant housing market over the past year appeared to still be crimping Britons’ propensity to spend — at least in retailers surveyed by the CBI.

British retail sales volumes fell again in October but the drop was milder than either retailers or economists had forecast, leaving the sales balance at -18 compared with -24 in September, which was a record low.

A series of major retailers have complained of tough trading conditions in the last few months.

British budget clothing retailer Matalan Plc reported a sharp fall in same-store sales on Tuesday, sending its shares lower as it said there was little prospect of improvement soon.

But the most recent official data on retail sales showed them rising at twice the expected rate in September and some retailers have managed to weather flagging consumer sentiment.

There was also good news on Tuesday about manufacturers, who saw the fastest pace of expansion in 10 months, led by strong export orders from the euro zone and other trading partners.

The CIPS/RBS purchasing managers’ index unexpectedly rose to 51.7 from 51.5, and came alongside an even bigger rise in a comparable index of euro zone manufacturing.—Reuters