Slowdown takes heat off rates
Wednesday 08 February 1995
Although manufacturing output rebounded in December after the unexpectedly weak performance in November, the data also showed the rate of growth slowing significantly.
The Treasury seized on the slowing down argument, saying manufacturing growth attained a more sustainable rate in the final quarter of last year.
Kenneth Clarke, the Chancellor, confused the message by taking a rather different line. "The data shows growth being sustained very strongly in the fourth quarter of last year. Manufacturing remains very buoyant in this economy," he said, speaking after a conference on trade to the Far East.
The picture was further confused by the apparent inconsistency of yesterday's data with recent survey evidence from the CBI showing continuing strong optimism on production.
Yesterday's completion of data for 1994 confirmed that production grew at its fastest pace since 1989.
Manufacturing output rose by 0.5 per cent in December from a month earlier, mainly driven by increased output in the food, drink and tobacco, basic metals and engineering industries. It was up 5.3 per cent from a year earlier.
Industrial production, which is usually more erratic because of the inclusion of energy, increased by a stronger 0.8 per cent from November, and was up 5.3 per cent year-on-year.
The more reliable three month comparison indicated the slowdown, with manufacturing output rising by 0.7 per cent in the final quarter of last year, compared with growth rates of well over 1 per cent earlier in 1994.
Already heartened by the fall in commodity prices on Monday, the market yesterday warmed in early gains to the view that the output data show inflationary pressures are cooling. The FTSE 100 closed up 10.7 at 3072.7
Yesterday's output data lend credence to the argument that economic growth has passed its peak, a point strongly taken up by the Treasury. "The figures confirm strong manufacturing growth in 1994, with a slowdown to a more sustainable rate in the fourth quarter," it declared.
"The Treasury is leaping on these figures to say perhaps we do not need to do much more on interest rates, but the Bank of England will be sceptical about running policy on the back of this better set of industrial figures," said Mark Reckless of S. G Warburg.
Eddie George, Bank of England Governor, has made a point recently of stressing the view that the economy is slowing down, and that the latest interest rate rise was designed to head off inflationary pressures, particular from producer prices, wages and retail sales, seen to be building up in the pipeline.
But in trying to judge future monetary policy implications, analysts are finding their task complicated by the seemingly inconsistent picture of the economy presented by the latest output data and material from the CBI industrial trends survey, which rose from plus 17 in October last year to plus 33 in December.
"If the economy is slowing down, why are people responding to the CBI survey saying they are piling more and more into production," Mr Reckless said.
- 1 Finland schools: Subjects scrapped and replaced with 'topics' as country reforms its education system
- 2 The West has it totally wrong on Lee Kuan Yew
- 3 #FreeTheNipple: Women in Iceland bare breasts in solidarity with trolled student
- 4 Scientists have discovered a simple way to cook rice that dramatically cuts the calories
- 5 Zayn Malik quits One Direction: Hundreds of workers request compassionate leave following band member's exit
Germanwings captain Patrick Sondenheimer tried to break into locked cockpit door 'with an axe' as plane was descending
Amanda Knox murder conviction: Italian court overturns verdict for US student and Raffaele Sollecito in the killing of Meredith Kercher
Saudi Arabia says it won't rule out building nuclear weapons
The battle for the Middle East's future begins in Yemen as Saudi Arabia jumps into the abyss
#FreeTheNipple: Women in Iceland bare breasts in solidarity with trolled student
Nigel Farage brands LGBT activists 'filth' and 'scum' and accuses them of scaring away his children after they invade his local pub
Ukip supporters are 55 or older, white and socially conservative, finds British Social Attitudes Report
JK Rowling responds to fan tweeting she 'can't see' Dumbledore being gay
Russia threatens Denmark with nuclear weapons if it tries to join Nato defence shield
Jeremy Clarkson sacked live: Alan Yentob 'wouldn't rule out' ex Top Gear host's BBC return
Germanwings plane crash live: Co-pilot Andreas Lubitz wanted to 'do something people would remember him for'
iJobs Money & Business
Negotiable: Recruitment Genius: To provide a prompt, friendly and efficient se...
Negotiable: Recruitment Genius: You will be the first point of contact for all...
£18000 - £24000 per annum + benefits: Ashdown Group: HR, Payroll & Benefits Of...
£35000 - £38000 per annum + benefits : Ashdown Group: A highly successful, int...