Relief for industry as pound takes a knock

There was relief for manufacturers yesterday as sterling dived more than three pfennigs against the mark to its lowest level since early February. The drop followed remarks by Howard Davies, Deputy Governor of the Bank of England, who said financial markets were expecting a fall in the pound.

New figures yesterday showed that the slow recovery in manufacturing continued in January with no sign the strong pound had hit output anyway.

Eddie George, Governor of the Bank of England, said in a speech last night that sterling posed a dilemma over interest rates, but he repeated the Bank's view that a "moderate" rise was needed to slow domestic demand.

Manufacturing output expanded by 0.3 per cent in January, taking its annual growth up to 1.6 per cent. Output is now rising at the fastest rate for more than a year.

Total industrial output, which also includes electricity, gas and water, North Sea production and mining, was flat. But its year-on-year growth climbed to 2.4 per cent. The sectors which rely most on exports - engineering, cars and chemicals - showed no signs of exchange rate damage.

"These numbers show little evidence at this stage that the stronger pound has hit the export competitiveness of British industry," said Edmund Nonis, an economist at Nikko.

Martin Brookes at Goldman Sachs said surveys pointed to another jump in manufacturing output last month. "Strong domestic demand has had an offsetting effect," he said.

Recent surveys have, however, pointed to a slowdown in the growth of export orders despite the fact that exporters have reduced their prices in a bid to overcome the impact of the strong pound. The Purchasing Managers' Index showed export orders barely increasing, leading some City experts to predict that manufacturing industry will remain fragile.

The Office for National Statistics had revised down output growth at the end of last year. The full year's increase in industrial production was revised up by 0.1 per cent to 1.2 per cent, but the increase in the fourth quarter was revised down from 0.9 per cent to 0.6 per cent.

"That might be enough to take the estimate of GDP growth from just above trend to its trend level," said John O'Sullivan at NatWest Markets.

The size of the quarterly rise in GDP has been one of the decisive factors for interest rates. Revised figures for the fourth quarter are due before Kenneth Clarke and Mr George are due to hold what could be their last monetary meeting on 10 April.

Mr Clarke has also used the strength of sterling to justify turning down the Bank's advice to raise interest rates. The pound ended at DM2.7134, compared with the previous day's close of DM2.7377.

Start your day with The Independent, sign up for daily news emails
ebooksA special investigation by Andy McSmith
Jerry Seinfeld Comedians in Cars Getting Coffee
peopleSitcom star urges men to be more supportive of women than ever
Life and Style
Living for the moment: Julianne Moore playing Alzheimer’s sufferer Alice
Jay Z
businessJay-Z's bid for Spotify rival could be blocked
footballLouis van Gaal is watching a different Manchester United and Wenger can still spring a surprise
The spider makes its break for freedom
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

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

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Evening Administrator

£8 per hour: Recruitment Genius: This Pension Specialist was established early...

Guru Careers: Executive Assistant / PA

£30 - 35k + Bonus & Benefits: Guru Careers: We are seeking an Executive Assist...

Ashdown Group: Graduate Application Support Analyst

£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

Reach Volunteering: External Finance Trustee Needed!

Voluntary post, reasonable expenses reimbursed: Reach Volunteering: Would you ...

Day In a Page

War with Isis: Iraq's government fights to win back Tikrit from militants - but then what?

Baghdad fights to win back Tikrit from Isis – but then what?

Patrick Cockburn reports from Kirkuk on a conflict which sectarianism has made intractable
Living with Alzheimer's: What is it really like to be diagnosed with early-onset dementia?

What is it like to live with Alzheimer's?

Depicting early-onset Alzheimer's, the film 'Still Alice' had a profound effect on Joy Watson, who lives with the illness. She tells Kate Hilpern how she's coped with the diagnosis
The Internet of Things: Meet the British salesman who gave real-world items a virtual life

Setting in motion the Internet of Things

British salesman Kevin Ashton gave real-world items a virtual life
Election 2015: Latest polling reveals Tories and Labour on course to win the same number of seats - with the SNP holding the balance of power

Election 2015: A dead heat between Mr Bean and Dick Dastardly!

Lord Ashcroft reveals latest polling – and which character voters associate with each leader
Audiences queue up for 'true stories told live' as cult competition The Moth goes global

Cult competition The Moth goes global

The non-profit 'slam storytelling' competition was founded in 1997 by the novelist George Dawes Green and has seen Malcolm Gladwell, Salman Rushdie and Molly Ringwald all take their turn at the mic
Pakistani women come out fighting: A hard-hitting play focuses on female Muslim boxers

Pakistani women come out fighting

Hard-hitting new play 'No Guts, No Heart, No Glory' focuses on female Muslim boxers
Leonora Carrington transcended her stolid background to become an avant garde star

Surreal deal: Leonora Carrington

The artist transcended her stolid background to become an avant garde star
LGBT History Month: Pupils discuss topics from Sappho to same-sex marriage

Education: LGBT History Month

Pupils have been discussing topics from Sappho to same-sex marriage
11 best gel eyeliners

Go bold this season: 11 best gel eyeliners

Use an ink pot eyeliner to go bold on the eyes with this season's feline flicked winged liner
Cricket World Cup 2015: Tournament runs riot to make the event more hit than miss...

Cricket World Cup runs riot to make the event more hit than miss...

The tournament has reached its halfway mark and scores of 300 and amazing catches abound. One thing never changes, though – everyone loves beating England
Katarina Johnson-Thompson: Heptathlete ready to jump at first major title

Katarina Johnson-Thompson: Ready to jump at first major title

After her 2014 was ruined by injury, 21-year-old Briton is leading pentathlete going into this week’s European Indoors. Now she intends to turn form into gold
Syrian conflict is the world's first 'climate change war', say scientists, but it won't be the last one

Climate change key in Syrian conflict

And it will trigger more war in future
How I outwitted the Gestapo

How I outwitted the Gestapo

My life as a Jew in wartime Berlin
The nation's favourite animal revealed

The nation's favourite animal revealed

Women like cuddly creatures whilst men like creepy-crawlies
Is this the way to get young people to vote?

Getting young people to vote

From #VOTESELFISH to Bite the Ballot