"Today's manufacturing figures for March 2007 were better than expected but longer-term comparisons highlight the serious risks still facing the sector. The manufacturing recovery is still very vulnerable. There is a distinct danger that the cumulative effects of repeated interest rate increases, coupled with the strong pound, would damage the sector, unless corrective action is taken.
"Manufacturing output rose by 0.6% between February and March 2007, better than expected. But in the three months January-March 2007, manufacturing output fell by 0.3% compared with the previous three months, and rose by only 1.4% compared with the same period a year ago. While today’s monthly increase is welcome, it is very disappointing that output is now lower than in Q3 2006. The manufacturing figures remain depressingly weak by historical standards.
"The manufacturing sector has shown resilience in the face of difficult circumstances but higher interest rates, the strong pound, and global uncertainties pose threats. Today’s expected Bank Rate increase would add to the pressures, and the sector’s position could become dangerous if interest ratters have to increase further later in the year.