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Sterling was hammered by a slump in factory output today which cast fresh doubt over the economy's health.
Official figures showed industrial production fell 2.5% in August — worse than the 0.2% rise forecast in the City and July's 0.5% increase. Manufacturing output, which excludes energy production, fell 1.9%.
It damped hopes that the recession is over. Richard McGuire of RBC Capital Markets said: “This acts as a reminder that the unfolding recovery will be at best gradual and at worst prone to reversal.”
Philip Shaw of Investec said: “This is a bit of a reality check on the status of the UK economy.”
Sterling was up more than a cent against the US dollar at $1.6049 this morning but crashed back to $1.5877 after the figures were published. The pound also gave up early gains against the euro.
Statisticians blamed the shocking news on factories shutting down for a break in August as demand for goods at home and abroad remained subdued.
Alan Clarke of BNP Paribas said: “It does raise genuine concerns that the green-shoots' bounce-backs are losing some of their thrust. This recovery could be too good to be true.”
Reader views (2)
The pound will go back up as it becomes harder to get hold of. People are not spending like they once did, especialy when we go abroad, such as buying houses, the price of houses in France and Spain has crashed, why, well far less of us are going over to buy, the boom years were when the pound was €1.50, and you could cross the channel and buy a car 40% cheaper, if europe wants to see a recovery they should support the pound, all those thousands of empty new builds in Spain are unsold because we cant afford them any more.And going back even further the original strength of the Spanish economy was the low value of the pesata, now their tourist industry is based on the un-affordable euro, and as the euro goes up our spending abroad dwindles.
- Jim Allan, Lake District
Britain has lost its way in the modern world in terms of its once highly coveted industrial prowess and since it was the world’s foremost technological nation that led the world some 100 years ago. What has gone so badly wrong for us? The answer is that successive British governments from when Henry Campbell-Bannerman become the first Prime Minister of Britain and was the first to officially bear the title of 'Prime Minister' to Brown today, did and do not still understand the ‘real’ strengths of the British people. These reside as just two examples, in the creative and innovative thinking of our people determined by government reports by Japan (1980s) and Germany (1990s). This stated that up to 55% of the modern world that we see today was created through the thinking of our people. But the most important fact is that 75% of this leading-edge thinking came from the British lone inventors and not our universities or advanced centres of research. Therefore this country needs more than anything else, the technological catalyst and system putting in place where our innovative thinking can be released. For this is the only thing that will deliver our nation in the future from increasing poverty and continual economic decline. This need is for the establishment of the ORE-STEM system of innovative and creative development in the UK and where it is the only viable answer to our problems. Even the world's leading scientists said so.
Dr David Hill
World Innovation Foundation
- Dr David Hill, Huddersfield
