Official figures yesterday also showed that investment by the construction industry fell sharply during the three months to September. Together, the two declines go a long way to explaining a disappointing 2.2 per cent fall in economy-wide investment last quarter.
Manufacturing industry increased its investment by 1 per cent in the latest quarter. It remained 14 per cent lower than a year earlier, although many City economists suspect these official statistics are underestimating the true picture.
Manufacturers continued to run down their stock levels, as did retailers and wholesalers, suggesting that the stock overhang which kept the economy so subdued until the summer has probably been eliminated.
Yesterday's figures showed a small increase in stock building across the economy, but this was more than accounted for by the fact that all the statistical discrepancies are parked in this figure. The true position was almost certainly a fall in stock levels, keeping the ratio of stocks to output on a firm downward trend.
The detailed breakdown of investment spending by the utilities is not yet available, but the Office for National Statistics said investment by privatised electricity companies had been broadly stable in the third quarter while investment by gas and water companies had fallen. This follows a drop of more than 22 per cent in capital expenditure by all the utilities during the second quarter. Investment spending in these industries can be volatile quarter to quarter, but the figures suggest there has been virtually no rise in year-on-year terms. It fell by nearly 20 per cent in 1995, which was the third year running they had cut back on investment spending.
The latest figures will reinforce the Labour Party's determination to press ahead with its windfall tax. It has listed cuts in investment by the privatised water, electricity and gas companies during the past four years as one of the justifications for the proposed levy.
The figure for construction in the latest quarter showed a severe fall. Investment was down 27 per cent during the quarter and 21 per cent compared with a year earlier. Partial figures for services showed falling investment spending in retailing and wholesaling.Reuse content