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Tuesday, 6 February, 2001, 14:52 GMT
UK manufacturing output rises
graph showing the rise in manufacturing output
UK manufacturing is continuing on its slow but steady path to recovery, with output rising 0.5% in the final three months of 2000.

But a fall in the output of electricity and gas, and a sharp downturn in the mining and quarrying sector, led to a fall of 0.6% in the overall industrial output during the same period.

These figures, which indicate the state of the UK economy, will be carefully examined to see whether the US slowdown really is having an impact on global economies.

And it may also influence the Bank of England's decision on Thursday whether to cut interest rates.

Upward revisions

Over the full year manufacturing output rose by 1.6% and industrial output by 1.5%.

The rise in output between 1999 and 2000 of 1.6% is the largest rise seen in six years, and is attributed to the growth of the electrical, optical equipment and chemical industries.

The Office of National Statistics has now revised upwards its estimate of the rate of manufacturing growth to 2% from 1.5%.

But the forecast for industrial output has been kept steady at zero growth.

Weaker sentiment

The Confederation of British Industry (CBI) has also released its quarterly trend survey, confirming that manufacturing output is expected to rise in the next four months in virtually all regions.

But the same survey also revealed that business confidence among British manufacturers is still falling across most of Britain.

It tends to be announcements such as the job cuts at steelmaker Corus which alter sentiment, rather than actual figures showing manufacturing output strength.

It is this negative sentiment which has led the CBI to call for the Bank of England to cut interest rates by 0.25% when it meets on Thursday.

"A 0.25% cut would hold up investment plans and encourage future investment," explained the CBI's associate director of economic analysis Sudhir Junankrar.

Hoping for cuts

Many City analysts are also hoping for a cut in interest rates on Thursday.

"I just hope the better manufacturing numbers don't put them (the Bank of England) off from cutting interest rates," said KPMG's Andrew Smith.

Cutting interest rates is a measure usually taken to inject more strength into a slowing economy by increasing consumer spending and making it cheaper for companies to borrow money and invest.

But the rise in manufacturing shows that the UK economy is continuing to grow healthily, suggesting that an interest rate cut is not urgently required.

"It's important if the world (economy) is slowing down that central banks cut rates. A quarter point cut this week is the most we can hope for," added Mr Smith.

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See also:

06 Feb 01 | Business
TUC demands manufacturing boost
18 Jan 01 | Business
Manufacturing recovery still fragile
29 Dec 00 | Business
Fears over manufacturing jobs
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