The woes of Britain’s motor industry were the biggest single factor behind a continuing decline in manufacturing output as a whole in September.
A 0.8 per cent drop left the total 2.3 per cent short of that in September last year.
Despite hopes that the weaker pound would boost the competitive strength of British industry, output has now fallen for seven months running, the longest succession of monthly declines since December, 1980.
Bleak official numbers from National Statistics came the as the Bank of England’s interest-setting committee began a two-day meeting to decide whether and by how much to cut the cost of borrowing this month.
“Today’s figures confirm that the decline in manufacturing is accelerating and reinforce the need for bold and decisive action by both the Bank of England and the Government,” said the EEF’s chief economist, Steve Radley.
“A full-point cut is the bare minimum required from the Bank, whilst Government must use the forthcoming pre-budget statement to set out timely and targeted measures to help business.”
But the British Chambers of Commerce’s chief economic adviser, David Kern, a consistent champion of cheaper borrowing in the past, called for a more measured approach.
“We urge the MPC to cut interest rates to four per cent on Thursday. Failure to cut rates by half a point would damage confidence.
”We also expect the MPC to make additional interest rate cuts in the following months, to 3.5 per cent before Christmas and to three per cent early in 2009.
“The MPC must follow a deliberate strategy of cutting rates steadily and forcefully, without lurching into sudden emergency measures that may unsettle the markets and undermine confidence.
“The recession is likely to be prolonged and the MPC must not use up all its bullets too early.”
But Hetal Mehta, senior economic adviser to the Ernst & Young ITEM Club, differed, demanding a cut of a full percentage point today.
“Anything less than that would be a case of ‘too little, too late’.” he insisted.
Over the three months to September manufacturing output fell by 1.3 per cent from April/June to a level 1.9 per cent short of that in the third quarter of last year.
NS said output in engineering and allied industries suffered a one per cent setback between August and September.
Within in that, the manufacture of motor vehicles fell by 3.6 per cent and that of automotive components and bodies by two per cent.
On a three monthly comparison, output of vehicles was down by 2.5 per cent on April/June and that of components by 4.4 per cent. That left components 8.4 per cent down year on year, although vehicles were still showing a 0.2 per cent increase.
The biggest percentage fall was in output of medical and orthopaedic equipment. Buying by the National Health Service appears to have tailed off after a surge in March towards the end of the 2007/08 tax year.
Some manufacturers extended their usual August shutdowns into September. This is usually a busy month, so seasonally adjusted numbers showed a 4.5 per cent decline, building up to 7.4 per cent on a three-monthly comparison and a drop of 14.6 per cent year on year.