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.
- 3 Dutch King Willem-Alexander declares the end of the welfare state
- 5 Giant Minion terrorises drivers in Ireland as 40ft inflatable blocks busy Dublin road
Sabrina Corgatelli: US hunting tourist posts picture of herself with dead giraffe after Cecil the lion outrage
'Gene drive': Scientists sound alarm over supercharged GM organisms which could spread in the wild and cause environmental disasters
Labour leadership race: Jeremy Corbyn could be the next Prime Minister, says Ken Clarke
Dutch King Willem-Alexander declares the end of the welfare state
Tom Cruise: Reporters banned from asking actor about Scientology
Is Britain really full up? Are migrants taking our jobs? Leading academic answers the most common anti-immigration claims
Calais Migrant Crisis: Deputy Mayor of Calais labels Cameron's use of 'swarm' as 'racist' and 'ignorant'
Chris Leslie: Jeremy Corbyn's anti-austerity agenda will harm the poor, says Labour shadow Chancellor
Landlords renting properties to illegal immigrants to face up to five years in prison
While we fixate on Calais, the Home Office is quietly deporting dozens of migrants on 'ghost flights'
Calais crisis: The seven claims made about the migrants - and the reality
iJobs Money & Business
£20000 - £25000 per annum + OTE £45K: SThree: SThree Group have been well esta...
£21000 per annum: Recruitment Genius: This is an exciting opportunity to join ...
Up to 70k DOE: Guru Careers: We are seeking an experienced Financial Director ...
£11000 - £50000 per annum: Recruitment Genius: This financial company offer ma...