Fuel crisis fallout 'is not over yet'

by ROBERT LEA THE short-lived fuel crisis helped to slow growth in the British manufacturing sector last month, but companies are warning that its effects may not yet have been fully felt.

While September's petrol-depot blockades skewed the monthly data from the Chartered Institute of Purchasing and Supply, the Bank of England's monetary policy committee, which meets later this week to set interest rates, will take heart that the latest figures show little signs of inflation from the rise in the oil price, the cause of the demonstrations in the first place.

The short sterling interest rate futures market indicated it believes the MPC will keep rates unchanged this month at 6%.

The Purchasing Managers' Index, out today, recorded a figure of 51.6 for September against 51.8 in August and down from the 12-month high of 52.0 in July. Figures above 50 indicate growth in the manufacturing economy. PMI details showed that while new orders are still growing, the weak euro continued to hit trade from the Continent, and cheaper foreign imports led to lost sales in the domestic market.

Subdued demand was not helped by the fuel crisis, which had its largest effect in a sharp fall in delivery times in the month. Delays were the longest since May 1995.

Roy Ayliffe, director of the Chartered Institute of Purchasing and Supply, said: 'Under immense pressure, purchasing managers acted strategically, satisfying demand directly from their stocks and avoided increased purchasing. The sharp lengthening of delivery times seen during the month hints that the full impact of the fuel crisis may be still to appear.'

The MPC, meanwhile, will look closely at the input prices in the Purchasing Managers Index data which showed that the rate of inflation, while still rising, eased marginally during the month despite the surge in the oil price and high global commodity prices.

Separate euro-zone PMI figures showed a fifth consecutive slowdown in manufacturing growth in economies using the euro, down to 57.2 in September from 58.6 in August.

Neither set of figures had much impact on foreign exchange, where dealers were biding their time ahead of this week's triple whammy of US, European Central Bank and British interest rate meetings. Against the dollar, the euro was not much moved at 88.27 cents. The pound was off slightly at $1.476.

Brent Crude for November delivery pushed back through $30 a barrel after last week's sell-off. Continuing tensions between the Iraqis and the Kuwaitis sent the benchmark oil price ahead half a dollar to $30.35.

http://www.thisislondon.co.uk/dynamic/news/business_story.html?in_review_id=321715&in_review_text_id=265093

-- Martin Thompson (mthom1927@aol.com), October 02, 2000