Disappointing manufacturing figures strengthen case for interest rates to remain low

11th July 2014

Manufacturing output in May 2014: down 1.

3% on the month, up 3.7% on the year Total industrial production in May 2014: down 0.7% on the month, up 2.3% on the year Commenting on the manufacturing and production figures for May 2014, published today by the ONS, David Kern, Chief Economist at the British Chambers of Commerce (BCC) said: -Despite the progress made over the past year, manufacturing output is still more than 7% below pre recession levels - in contrast to services which are more than 2% higher. The annual figures still show healthy growth, consistent with our Quarterly Economic Survey published this morning, which shows that although the recovery is continuing, the pace has slowed. -Manufacturing exporters must now cope with a much stronger pound, making their products more expensive for overseas customers. Exporters have so far shown resilience however, the situation could become serious if sterling strengthens much further. This reinforces the arguments for the MPC to delay increases in interest rates until it becomes absolutely necessary. The recovery must be given time to consolidate and gather more momentum. The risks to the economy of premature increases in rates are much greater than the risks of waiting a little longer.