- Manufacturing output appears now at least to have stopped failing; confidence surveys suggest a more positive picture for the fourth quarter (as does the CSO's shorter leading indicator).
- The weakness of demand at the end of last year and the first half of this was driven mainly by destocking, which proved more of a depressant than expected (though mitigated by an improvement in net trade).
- The more recent firming in manufacturing output suggests destocking may now be much reduced; but stockbuilding and trade are less likely to reverse falling output in the much larger services sector.
- Real personal disposable incomes remain depressed and consumption is sluggish, though it has benefited from a fall in the rate of saving financed from lower asset acquisition (rather than renewed borrowing). With supply continuing to exceed demand in the housing market, recovery there continues to look unlikely in the near future.
- Corporate sector adjustment is now bearing fruit; liquidity and profitability have started to rise and the financial deficit to fall. Balance sheets are being strengthened.
- Progress against inflation remains good. Productivity is starting to recover and unit wage costs in some sectors are being contained. Competitiveness has improved, both within Europe and more especially in dollar markets as the dollar has risen since the turn of the year.
Published on
01 December 1991
The domestic economy