"The manufacturing output figures were very disappointing, and much worse than the markets expected. Manufacturing output fell 0.7% in October, while the markets expected a small rise of 0.2%. The sharp October fall was the third decline in a row. These figures, which contain revisions to earlier estimates, confirm that manufacturing output fell in both Q1 and Q2 2005. Although the sector recorded a very small rise in Q3, the October fall places it again in negative territory. In the three months August-October, manufacturing output recorded a 0.3% fall over the previous three months, and a 0.4% fall over the same period a year ago.
"The manufacturing sector's persistent failure to sustain a meaningful recovery, and the growing risk of renewed manufacturing recession, is a cause of acute concern. The BCC's economic forecast, which signalled already negative growth of 0.3% in manufacturing output for 2005 as a whole (even if we assume a gradual improvement from now onwards) is now pointing to an even larger 2005 fall of 0.5-0.6%."
David Kern concluded: "The manufacturing sector's acute underlying weaknesses, and the risks to the economy highlighted in the Pre-Budget Report, reinforce our view that the authorities must act forcefully to prevent a worsening in the economic situation. The Chancellor must remove the threat of further tax increases on business. We also believe that we need further interest rate cuts in the very near future. The financial markets do not expect a repo rate cut on Thursday, but we strongly urge the MPC to act without undue delay. The economy is weakening, and confidence is faltering. Alleviating the plight of manufacturing, and countering the downward pressures on the economy, are now key priorities.