View from City Road: A comparatively gentle downturn

It is a strange but true fact that Germany's industrial downturn is now sharper than our own. The graph shows that the British industrial downturn began much earlier, but that the peak to trough decline has been smaller than in Germany. Germany's output began falling exactly a year ago and is now down by 11.5 per cent after adjustment for copious public holidays. Our own manufacturing output fell by 8.9 per cent from its monthly peak in April 1990 to the CSO's present estimate of the monthly trough in January 1992.

Part of the contrast is due to Germany's reliance on capital goods, always the most cyclical component of production. But the figures also provide some support for the view that the British manufacturing sector has quietly been doing rather well during this recession (relatively, of course, not absolutely). The increase in car production from Nissan at Sunderland (and now from Toyota at Derby and Honda at Swindon) has helped, as has the demand they are generating among components suppliers.

But the recent figures from companies such as BTR, GKN, Mayflower and David Brown show that the phenomenon is more widely spread. Moreover, the post-ERM devaluation is giving our manufacturers an additional fillip. This week's Oxford economic forecast predicts that the two sectors of the economy that will grow most rapidly this year will be mechanical engineering and metal goods (up 3.3 per cent) and electrical and electronic engineering (up 6.7 per cent). This is just as well. If Britain is to grow sustainably through the 1990s it will be because our trading companies have clawed back some of their share of world markets, including our own.