Stagnant manufacturing bodes well for prices
Tuesday 09 July 1996
The latest evidence of the stagnation in manufacturing came on the eve of publication of the Treasury's summer forecast, which will make it clear that Chancellor Kenneth Clarke's leeway for tax cuts in the next Budget will be tiny. Many City economists believe the Chancellor will exploit the window of opportunity to reduce the cost of borrowing.
"He has the luck of the devil with the figures," said David Hillier, an economist at BZW, predicting a further reduction in base rates when Mr Clarke meets the Governor of the Bank of England at the end of this month.
The 1.3 per cent June drop in the cost of materials was the biggest since September 1993. The year-on-year decline of 4.8 per cent in "core" costs - excluding food, drink, tobacco and petroleum - was the lowest figure since the mid-1980s.
Prices that manufacturers charged at the factory gate fell in June for the second month running, declining 0.2 per cent compared with May. "Core" output price inflation fell to 2 per cent, returning to the mid-1994 trough and the lowest since the 1960s.
"These are some of the lowest rates of producer price inflation in a decade, with no evidence of input price pressures," a Treasury spokesman said.
Yet manufacturing output was flat in May despite price discounting. Although 0.3 per cent higher in the three months to May compared with the previous three, it remained at the same level as a year earlier. Food and drink, textiles and engineering output all advanced during the latest three months.
A surge in energy use due to the cold weather took total industrial output 1.4 per cent higher than a year earlier. Total output has risen 0.5 per cent in the latest three months.
Pessimists think industry will spend the rest of the year clearing the overhang of unsold stocks on the warehouse shelves. "Manufacturing output might well fall for the remainder of this year," said Adam Cole at brokers James Capel.
That bodes well for the outlook for prices. The combination of falling materials costs and weak demand is expected to keep factory gate inflation low.
"This should act as a powerful force to ensure that the Government's inflation target is achieved during the first half of 1997," predicted David Walton at Goldman Sachs.
New UK station Russia Today gives a very bizarre view of Britain
By performing as African Americans or Indians, white people get to play act a kind of 'imaginary liberation', writes Michael Mark Cohen
New essay by JK Rowling went live on Pottermore site this morning
Top Gear presenter is no stranger to foot-in-mouth controversy
- 1 'Nasa Confirms Six Days of Darkness in December': No, they don't - it's a hoax
- 3 Topshop at centre of row over body image as 'shocking' skinny mannequin photo goes viral
- 4 Top Gear presenter Jeremy Clarkson criticised for beer tweet
- 5 The bubble bursts for Sodastream
'Nasa Confirms Six Days of Darkness in December': No, they don't - it's a hoax
Top Gear presenter Jeremy Clarkson criticised for beer tweet
Halloween 2014: From the Screaming Man of Pluckley to the 'White Lady' of the Tower of London - Britain's 20 most haunted places
The bubble bursts for Sodastream
Russian politician says Apple CEO Tim Cook should be 'banned' from country after coming out as gay
Pope Francis declares evolution and Big Bang theory are real and God is not 'a magician with a magic wand'
Huge surge in Ukip support after EU funding row, according to new poll
Ukip ‘exploiting grooming scandal’ to secure party’s first police chief
Nigel Farage: 'There’s nothing wrong with white people blacking up'
Maureen Lipman says 'she can't vote Labour while Ed Miliband is leader'
Muslims, immigration and teenage pregnancy: British people are ignorant about almost everything
iJobs Money & Business
£18000 - £23000 per annum + Comission: SThree: SThree, International Recruitme...
£20000 - £25000 per annum + OTE £35K: SThree: We consistently strive to be the...
£20000 - £23250 Per Annum pro rata: Clearwater People Solutions Ltd: Pro rata ...
£40 - 48k + Benefits: Guru Careers: We are seeking a Marketing Manager to join...