British Riots Belie Economic Upswing

As the smoke clears on the riot scarred streets of Manchester and Birmingham, one thing's apparent: When the going gets tough, the tough go shopping.

By shopping, we don't mean a spree of the five-fingered-discount variety. We're talking about the fact that record-low borrowing costs in Great Britain are partly behind a small but scrappy real estate boom. British house prices have increased steadily - 0.3 percent last month alone - as the housing market in ol' Blighty begins to find its swagger again.

The Bank of England's Monetary Policy Committee voted to keep its benchmark interest rate on hold for the 29^th straight month - but who's counting? - during their powwow last week. Fears about weakening economic growth continue to outweigh concerns about inflation, according to a recent report by economists at the National Bank of Kuwait.

"As widely expected, the Monetary Policy Committee kept the central bank's benchmark interest rate at 0.50 percent and its asset purchase program unchanged at £200 billion. The Bank of England is trying to find a healthy balance between rising prices and a sluggish economic growth," said an economist at NBK.

Another surprise was that England's services industry accelerated in July to the fastest pace in four months, led by demand at business services and technology companies. The Services PMI rose to 55.4 from 53.9 in June, against an expected drop to 53.2, according to NBK.

Still, the Manufacturing PMI unexpectedly dropped below 50 in July for the first time since September 2009. The index dropped to 49.1 from 51.3 against an expected drop to 51.0, showing that the manufacturing sector is contracting.