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Effect on interest rates due to the investment in REITs
Pages 7 (1757 words)
The earnings by oil groups and record returns in services businesses revived the fortunes in manufacturing sector in Britain in 2006. The capital invested by UK companies in manufacturing sector rose to 15.5 percent in the final quarter.
This is due to the boosted sales that enabled companies exploit the increased pricing power. The driving force behind record fourth quarter returns was sharp gains on gross trading profits. The Bank of England has concern about the companies' attempts to boost the prices. According to the experts' opinion, the rising pricing power of the companies may trigger the rise in interest rates as the demand for credit increases. The oil companies gained in fourth quarter after average performance in third quarter. Compared to 2005, the profitability in the manufacturing sector climbed back into double figures. The rate of return has increased to 10 percent in fourth quarter. In third quarter it is just 6.9. The increase in pricing power of the companies has shown its effect on real estate sector also and the industry benefited from low interest rates existed last year and the pricing power enjoyed by them. According to the opinion of the analysis, the UK corporate sector remained to enjoy the continued strong profitability during this year as energy prices have been reduced. Though there are high energy costs, the companies have gained from the high pricing power. The decrease of energy costs and a retained pricing power will increase the profitability of the companies further. As the firms are pushing up their prices, the profitability is set to be increased. ...
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