Advertisement

Osborne’s makers aren’t marching

Britain's manufacturing industry continues to disappoint despite the chancellor's efforts to get the makers moving.

16-1-14-Osborne-634
Britain's manufacturing sector is stalling

The latest industrial production and manufacturing figures were "unambiguously rubbish", as Michael Hewson of CMC Markets put it. Industrial production (manufacturing, mining and energy supply) fell by 0.7% in November, the worst monthly fall in two years. Unusually warm weather dented electricity and gas output. Manufacturing output fared little better, declining by 0.4%. It has been treading water for a year. Industrial production is still 9.1% below the 2008 peak; factory output, 6.1%. Sterling sank to a five-year low under $1.44 against the dollar.

What the commentators said

Factors such as a strong pound over the last few years, a slowdown in China and emerging markets, the euro crisis and general market volatility aren't the chancellor's fault. But "it's the Tories" who are fuelling uncertainty and deterring investment through the EU referendum, and they have yet to tackle permanent obstacles for the sector, including skill shortages, restricted access to finance and comparatively high electricity costs.

Advertisement - Article continues below

The factory data, along with recent releases signalling slower growth, has fuelled the belief that interest rates will now stay lower for even longer, said Peter Spence in The Daily Telegraph. JP Morgan, one of the last banks to believe that the Bank of England would hike in the first half of the year, has now pushed its forecast for the first rise back to November.

This is the key reason sterling has weakened, but hardly the only one. The latest slump in the oil price implies that inflation, currently hovering around zero, is not likely to take off anytime soon, another reason to think the bank is in no hurry to tighten.

"Britain's hefty current-account deficit makes it one of the most vulnerable major currencies when market sentiment sours," added Jemima Kelly on Reuters.com, while the Brexit referendum is also moving centre stage. The uncertainty looks set to deter investment flows into the UK, leaving sterling exposed, Morgan Stanley's Ian Stannard told Bloomberg.com. Deutsche Bank thinks sterling could fall by another 15% against the greenback by the end of 2016.

Advertisement
Advertisement

Recommended

Visit/516758/beyond-the-brexit-talk-the-british-economy-isnt-doing-too-badly
Economy

Beyond the Brexit talk, the British economy isn’t doing too badly

The political Brexit pantomime aside, Britain is in pretty good shape. With near-record employment, strong wage growth and modest inflation, there is …
17 Oct 2019
Visit/economy/uk-economy/601605/spend-spend-spend-think-of-it-as-your-patriotic-duty
UK Economy

Spend, spend, spend – think of it as your patriotic duty

After months of lockdown, many of us will have some money to spare. If you do, says Merryn Somerset Webb, spend it.
2 Jul 2020
Visit/investments/property/601606/house-prices-crash-uk-property-prices-falling-where-next
Property

House price crash: UK property prices are falling – so where next?

With UK property prices falling for the first time in eight years, are we about to see a house price crash? John Stepek looks at what’s behind the sli…
2 Jul 2020
Visit/economy/uk-economy/601557/uk-australia-trade-deal
UK Economy

Why the UK should be gunning for a trade deal Down Under

It might seem a minor matter compared with Brexit, but a trade agreement with Australia is a big deal
28 Jun 2020

Most Popular

Visit/economy/inflation/601584/the-end-of-the-bond-bull-market-and-the-return-of-inflation
Inflation

The end of the bond bull market and the return of inflation

Central bank stimulus, surging post-lockdown demand and the end of the 40-year bond bull market. It all points to inflation, says John Stepek. Here’s …
30 Jun 2020
Visit/investments/commodities/gold/601587/bullish-gold-price-cup-and-handle-chart-pattern
Gold

This chart pattern could be extraordinarily bullish for gold

The mother of all patterns is developing in the gold charts, says Dominic Frisby. And if everything plays out well, gold could hit a price that invest…
1 Jul 2020
Visit/investments/property/601606/house-prices-crash-uk-property-prices-falling-where-next
Property

House price crash: UK property prices are falling – so where next?

With UK property prices falling for the first time in eight years, are we about to see a house price crash? John Stepek looks at what’s behind the sli…
2 Jul 2020