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Factories step up output

Peter Torday,Robert Chote
Monday 04 April 1994 18:02 EDT
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MANUFACTURERS stepped up production sharply last month to meet rising orders and to stock up ahead of Easter, according to a survey published today. This suggests that the jump in output in the new year should be maintained.

The latest Purchasing Managers' Index showed that all regions and industries saw rising activity, with orders rising for the third consecutive month. Domestic orders were buoyant, but export order growth was more subdued.

'There is every indication that this acceleration in activity will continue,' said Peter Thomson of the Chartered Institute of Purchasing and Supply.

The outlook for export orders will depend crucially on the performance of Britain's European export markets. A report out today from Data Resources International argues that Europe's main economies should start pulling out of recession this year and enter decisive recovery by 1995 but even lower interest rates are essential if the upswing is to occur.

DRI's latest European Outlook forecasts that average growth of 1.1 per cent in Britain, France, Italy and West Germany in 1994 will more than double by 1995. It argues that there is no good reason for short-term European rates to stop declining. DRI thinks rates in the UK, Germany and France will drop to between 4 and 4.5 per cent by the end of the year.

Dismissing the recent surge in German broad money supply growth, DRI says that inflation, not expanding money supply, is the bottom line for the Bundesbank. 'As inflation improves, short-term interest rates will fall. Long-term rates should drop back again once short-term rates fall back.'

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