Concerns over weak economy resurface

Lower investment and higher stockbuilding at the tail-end of 1995 renewed concerns about the weakness of the economy. But the financial markets shrugged off worries about the impact of the beef scare on Government borrowing, bidding more than two and a half times over for pounds 3bn-worth of gilts auctioned yesterday.

Total investment fell slightly in 1995 as a whole. This was due mainly to an 11 per cent drop in investment by utilities, mining and quarrying. Manufacturing investment rose 8 per cent, the highest rate of increase since 1992.

Economists said the figure was disappointing following the extremely high profits growth of the previous year. Firms had used the earnings to pay higher dividends and take over other companies rather than invest in new equipment or buildings.

Revised figures for investment and stocks showed that the decline in investment spending in manufacturing at the end of last year was not as steep as the 9 per cent originally estimated. However, it still fell by 5 per cent in the final quarter, returning to its end-1994 level.

The outlook for industrial investment this year is not encouraging. Profits are now increasing at a far slower pace, and the company sector returned to financial deficit for the first time in nearly three years at the end of 1995.

Levels of stocks were revised up, showing a total increase of just over pounds 1bn at 1990 prices in the final quarter. Ratios of stock levels to output in manufacturing reached their highest level since the start of 1993.

"Manufacturers are carrying too much raw material, too much work in progress and too many finished goods. It is quite alarming," Ian Shepherdson, an economist at HSBC Markets, said.

Despite the disappointing economic figures, financial markets were reassured by the gilts auction's success. Demand for the short-dated stock exceeded the pounds 3bn on offer 2.64 times. The "tail" - the gap between the highs and the average price - was only 4 basis points.

The Treasury yesterday published its second annual Debt Management Report, setting out the Bank of England's task in financing government borrowing in the new financial year. It forecast a financing requirement of pounds 35.6bn - the target pounds 22.4bn public sector borrowing requirement plus redemptions, which in 1996/97 will amount to pounds 11.5bn.

Suggested Topics
Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
ebooks
ebooksA special investigation by Andy McSmith
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Compliance Assistant

£13000 per annum: Recruitment Genius: This Pension Specialist was established ...

Ashdown Group: Market Research Executive

£23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...

Recruitment Genius: Technical Report Writer

£25000 - £35000 per annum: Recruitment Genius: A Technical Report Writer is re...

MBDA UK Ltd: Indirect Procurement Category Manager

Competitive salary & benefits!: MBDA UK Ltd: MBDA UK LTD Indirect Procurement...

Day In a Page

Isis hostage crisis: Militant group stands strong as its numerous enemies fail to find a common plan to defeat it

Isis stands strong as its numerous enemies fail to find a common plan to defeat it

The jihadis are being squeezed militarily and economically, but there is no sign of an implosion, says Patrick Cockburn
Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action

Virtual reality: Seeing is believing

Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action
Homeless Veterans appeal: MP says Coalition ‘not doing enough’

Homeless Veterans appeal

MP says Coalition ‘not doing enough’ to help
Larry David, Steve Coogan and other comedians share stories of depression in new documentary

Comedians share stories of depression

The director of the new documentary, Kevin Pollak, tells Jessica Barrett how he got them to talk
Has The Archers lost the plot with it's spicy storylines?

Has The Archers lost the plot?

A growing number of listeners are voicing their discontent over the rural soap's spicy storylines; so loudly that even the BBC's director-general seems worried, says Simon Kelner
English Heritage adds 14 post-war office buildings to its protected lists

14 office buildings added to protected lists

Christopher Beanland explores the underrated appeal of these palaces of pen-pushing
Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Scientists unearthed the cranial fragments from Manot Cave in West Galilee
World War Z author Max Brooks honours WW1's Harlem Hellfighters in new graphic novel

Max Brooks honours Harlem Hellfighters

The author talks about race, legacy and his Will Smith film option to Tim Walker
Why the league system no longer measures up

League system no longer measures up

Jon Coles, former head of standards at the Department of Education, used to be in charge of school performance rankings. He explains how he would reform the system
Valentine's Day cards: 5 best online card shops

Don't leave it to the petrol station: The best online card shops for Valentine's Day

Can't find a card you like on the high street? Try one of these sites for individual, personalised options, whatever your taste
Diego Costa: Devil in blue who upsets defences is a reminder of what Liverpool have lost

Devil in blue Costa is a reminder of what Liverpool have lost

The Reds are desperately missing Luis Suarez, says Ian Herbert
Ashley Giles: 'I'll watch England – but not as a fan'

Ashley Giles: 'I'll watch England – but not as a fan'

Former one-day coach says he will ‘observe’ their World Cup games – but ‘won’t be jumping up and down’
Greece elections: In times like these, the EU has far more dangerous adversaries than Syriza

Greece elections

In times like these, the EU has far more dangerous adversaries than Syriza, says Patrick Cockburn
Holocaust Memorial Day: Nazi victims remembered as spectre of prejudice reappears

Holocaust Memorial Day

Nazi victims remembered as spectre of prejudice reappears over Europe
Fortitude and the Arctic attraction: Our fascination with the last great wilderness

Magnetic north

The Arctic has always exerted a pull, from Greek myth to new thriller Fortitude. Gerard Gilbert considers what's behind our fascination with the last great wilderness