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UK output shows steep decline

Magnus Grimond
Monday 01 April 1996 23:02 BST
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Latest figures show Britain's manufacturing industry on the verge of a slump, just as the high street is showing signs of recovering the elusive "feel-good" factor lost in the last recession.

UK manufacturers saw output drop in March to its lowest level since October 1992, the seventh month in a row when production has been either flat or falling, according to Britain's purchasing managers. Meanwhile, the amount of notes and coins circulating in the economy - seen as a good measure of consumer spending - edged up 1.5 per cent in the first quarter, suggesting people are increasingly confident about splashing out on high street goods.

The figures were seen as reinforcing expectations of a continuing slow- down in the economy, increasing the prospects for a further cut in interest rates from their current 6 per cent.

But most economists yesterday held to the line that rates, cut three times in the past three months, were more likely to move in May than following tomorrow's meeting between Bank of England Governor Eddie George and Chancellor of the Exchequer Kenneth Clarke.

In the markets, the June short sterling contract - a key indicator of expectations for short-term rates - was up two basis points at 93.94, pointing to little change.

The purchasing managers' index, usually one of the first monthly pointers to the health of manufacturing industry, fell to a seasonally-adjusted level of 49.7 in March, down from 49.9 in February.

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