My concerns about manufacturing weakness were borne out by today’s purchasing managers’ survey, showing a fall in the key new orders index below the 50 level separating expansion and contraction. However, the output prices index simultaneously reached a new record high in its nine-year history.

There was a similar divergence in yesterday’s EU Commission consumer confidence survey. Respondents were more bearish on the economy and their own financial prospects, while the buying climate for major items fell to a 17-year low. My retail sales leading indicator now suggests a fall in spending in early 2008 – see first chart below.

All aboard for a 50 bp rate cut next week? Not so fast. Consumer perceptions of past and future inflation surged further, to record levels since the MPC’s inception. In isolation, this suggests rates should be rising not falling – see second chart.

It doesn’t get easier for the MPC. I shall post the MPC-ometer’s forecast on Monday.