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Unemployment falls further, whilst Bank of England maintains the Bank Rate at 0.25%

17 Mar 2017


At its February meeting, the Bank of England’s Monetary Policy Committee (MPC) voted 8-1 to maintain the Bank Rate at 0.25% and unanimously for no change to the extension of quantitative easing announced at its August meeting last year. Outgoing external member Kristin Forbes voted to hike the Bank Rate to 0.5% and some others struck a more hawkish tone, with the minutes stating that “some members noted that it would take relatively little further upside news… for them to consider that a more immediate reduction in policy support might be warranted.”

Results of the Labour Force Survey showed that employment rose by 92k in the three months to January to 31.9mn. Unemployment fell by 31k over the same period, bringing down the unemployment rate to 4.7%. But real average earnings growth – pay adjusted for CPI inflation, excluding bonuses – was flat on a year ago (the weakest outturn since mid-2014) as nominal wage growth continued to edge lower against a backdrop of higher inflation.

Industrial production made a weak start to 2017, falling by 0.4% month-on-month in January following a 0.9% rise in December, albeit beating consensus expectations for a slightly steeper decline (of 0.5%). Weighing most on industrial production was a 0.9% fall in manufacturing output, though this was driven by the volatile pharmaceuticals sector, as some of strength at the end of 2016 unwound. Still, the rolling quarterly momentum actually strengthened with January’s outturn and excluding pharma results in output rising by 0.3% in January on the month.

Construction output fell 0.4% on a monthly basis in January after having risen 1.8% in December. Weakness in housing (both new work and repair & maintenance) was the main driver of the decline. But as with manufacturing, the underlying trend in construction output was stronger: on a 3m/3m basis, construction output grew by 1.8%, with growth having been picking up since October 2016.


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