Pound stays low as UK exports slip

Fresh economic data have pushed the pound lower yet again, with sterling trading at its lowest level against the US dollar for six months.

The reason for the latest bout of weakness was a manufacturing survey by the Confederation of British Industry (CBI), that suggested export orders were at a nine-month low.

The pound had already shed half a percent against the dollar on Thursday morning, in anticipation of the CBI survey.

At 1500 GMT the pound was trading at $1.41 - a level not seen since November last year.

The manufacturing sector can take little relief from the pound's fall against the dollar, as it stayed just a fifth of a penny away from this year's high against the euro.

About 60% of UK trade is with the eurozone while only 15% is with the United States.

Business investment

Meanwhile, business investment growth remained healthy in the first quarter of this year, Office for National Statistics (ONS) data showed on Thursday, prompting speculation that economic growth for the period could be revised up.

The ONS said business investment rose a provisional 0.8% on the quarter to be up at 9.9% on a year earlier.

While the quarterly figure is lower than a very strong fourth quarter figure of 6.5%, it did not fall as much as many economists had expected, prompting speculation there would be an upward revision of gross domestic product data on Friday.

However, this did not provide any upward movement for the pound versus the dollar.

Improvement in total orders

The CBI manufacturing survey found that the export sector fell to its weakest level because of the slowing global economy.

The further weakening of export orders offset a slight improvement in domestic orders.

However, CBI figures showed that total order books had improved slightly from last month, which had been the weakest since July 1999.

Most economic indicators suggest that much of the UK economy is thriving, but there has been a slowdown in the manufacturing sector and figures earlier this week showed the UK trade deficit at a record high.

CBI findings

The increase in domestic orders was interpreted by the CBI as an indicator of strong consumer demand.

This would back up other evidence suggesting that robust domestic spending is helping to avert a sharp slowdown in the UK economy as a whole.

"This survey shows there are still clouds over UK manufacturing," said Sudhir Junankar, the CBI's associate director of economic analysis.

"While it would be wrong to talk of outright recession, certain key sectors like telecoms, electronic engineering and metal manufacturing can expect a significant decline in output over the coming months," he added.

The CBI has revised down its forecast for GDP growth this year to 2.1% due to the impact of the global slowdown and the foot-and-mouth epidemic, in line with many other forecasters.

But it has raised its forecast for 2002 by 0.2% to 2.7%

Euro rises

Earlier on Tuesday the euro rebounded one percent against the dollar after it had fallen to $0.8555 in Asian trade, its lowest level since November last year.

Rumours of intervention in the currency markets by the Bundesbank and the Bank of Japan, combined with interventionist comments by Japan's top financial diplomat, Haruhiko Kuroda, helped the euro bounce back against the dollar.

In October the euro had reached an all time low of $0.8230.

The slide, which started ahead of a decision by the European Central Bank to maintain interest rates at 4.5%, has been blamed on a clutch of data hinting that Europe's major economies may be growing slower than analysts had predicted.