THERE has been no let-up in the manufacturing industry slump as exports continue their decline with sterling's recent softening yet to make an impact, according to the CBI's Monthly Trends for May.
The CBI is, however, still looking for a ''soft landing'' for the UK economy over the next 18 months and suggests that the Bank of England may be overstating the risk to UK inflation from robust consumer spending.
''We are a bit more optimistic than they are,'' said CBI chief economist Kate Barker, commenting on the trends survey and CBI's latest economic forecasts.
She was responding to remarks earlier this week by the Bank of England's Mervyn King, that UK consumer spending would have to slow for the Bank to hit its inflation target of 2.5%.
Meanwhile, the CBI's findings - which include manufacturers' output expectations still falling and, for the next four months, at their lowest level since December 1992 - left sterling lower against both the dollar and the mark.
Total orders over the month weakened at the fastest rate in a monthly survey since May 1996, and export orders are now at their lowest level since January 1983, although domestic orders continued to hold up.
Only 9% of manufacturers reported export order books above normal, with 60% below normal, giving a negative balance of 51%. This despite sterling averaging DM2.93 and $1.65 over the survey period, compared with DM3.07 and $1.68 during April's survey.
Total orders fell, with 15% of manufacturers reporting above normal orders and 32% below normal.
Domestic prices are expected to fall over the next four months, and price expectations are the lowest recorded.
Together with factory gate prices, which only rose 1% in the12 months to April, there is little pressure on inflation from the manufacturing sector.
The CBI is forecasting that UK economic growth will slow during 1998, but should pick up in the second half of 1999, suggesting a ''soft landing''.
GDP growth is expected to end 1998 at 1.6%, averaging 2.1% for the year as a whole. Growth should pick up during 1999, ending the year at 2.4%, with an average of 2.1% in 1999.
These forecasts are within 0.1 percentage points of the CBI's February forecast.
On interest rates, the CBI considers short-term rates are set to stay at 7.25% until the fourth quarter of 1998, when a fall of 0.25% is expected.
Base rates are projected to decline further through 1999, to end the year at 6.25%, with underlying inflation forecast to stay within the Government's 2.5% target.
Sterling is forecast to drift down to DM2.78 by the end of this year, and DM2.64 by the end of 1999.
Consumer spending is expected to grow by 4% in 1998, and 1.9% in 1999, contributing 2.6 percentage points and 1.2 percentage points respectively to economic growth.
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