Shares hit record as exports and orders improve: CBI survey coincides with decision by Bundesbank to leave rates unchanged

MANUFACTURERS have seen an improvement in export and total order books since last month, but are more pessimistic about their level of output, according to the latest survey of industrialists by the Confederation of British Industry.

The CBI found price increases remain subdued and that stocks of unsold goods have risen higher above their desired levels. Ahead of the CBI survey the stock market rose to a new peak yesterday, despite fading hopes of an early cut in interest rates in the gilts market.

The Bundesbank left German interest rates unchanged at its last council meeting of the year and said a new money supply target did not imply a tougher stance on rates. It set a slightly tighter target - 4 to 6 per cent - for the expansion of M3 money supply in 1994, reflecting expectations of a relatively weak economy next year.

In Bonn, Chancellor Helmut Kohl said 'further drastic savings measures will be unavoidable next year' to contain the budget deficit.

Asked how the government would meet its pledge to hold the deficit to DM69.1bn ( pounds 27.2bn), Mr Kohl said there was no point in giving details before Christmas, but next year would see 'an enormous savings plan'. He ruled out, however, bringing forward to 1994 the introduction of an income tax surcharge planned for 1995, saying this would be 'bad medicine'.

Any lingering hopes that the Bundesbank might ease key rates were dashed by the publication yesterday of far worse than expected money growth figures for November; M3 jumped by 7.2 per cent, above October's 6.9 per cent.

On a more positive note the Bundesbank said price inflation was weakening rapidly, dropping to 3.6 per cent in November from 3.9 per cent a month earlier. It forecast average western German inflation next year below 3 per cent. Analysts are looking to January for the next rate cut.

The British government borrowed pounds 3.1bn last month to cover the shortfall between its spending and tax revenue, the Treasury said yesterday. The figure was in line with City forecasts and up from pounds 2.1bn in the same month last year.

The public sector borrowing requirement in the first eight months of the financial year totalled pounds 30bn, compared with the Budget forecast for the full year of pounds 49.8bn. Most City economists believe the PSBR will come in at, or slightly below, the figure forecast by the Treasury.

Net departmental spending is up 3 per cent on 1992/3 at pounds 158.5bn, while receipts have increased by the same proportion to pounds 133.8bn.