There was double good news for the British economy this week, as new figures showed record growth in manufacturing output, and the Institute for Fiscal Studies (IFS) backed the Coalition Government’s plans for reducing the deficit.
GOOD NEWS #1
UK manufacturing in January expanded at its fastest pace since records began in 1992, according to a survey by the Chartered Institute of Purchasing and Supply (CIPS), whilst employment in the manufacturing sector also rose at its fastest pace in 19 years, beating expectations.
David Noble, Chief Executive Officer of CIPS, said, “UK manufacturing steamed ahead in January as the sector continues to expand quicker than even the most optimistic amongst us could have predicted. As well as improved market conditions abroad, demand in the UK market also showed signs of growth. This is the much needed kick start to 2011 everyone in the sector was hoping for.”
GOOD NEWS #2
Further good news for the economy was delivered by the IFS, which backed the government’s strategy for putting the public finances back on a sustainable footing.
In its green budget, the think tank warned that delaying the plan, as Labour calls for, could undermine investor confidence in Britain. Any fiscal loosening could push up interest rates and be ‘ineffective’ in helping the economy.
The IFS said it, “…continued to believe that aiming to complete the fiscal repair job in one parliament is a sensible strategy as it should be more credible with international investors than a plan that involves tightening in a future parliament.” Instead, the think tank backed the OECD and the Bank of England in saying that the government should stick to its course.
The IFS said, “Any fiscal loosening aimed at helping the economy could be ineffective if it prompts an offsetting monetary tightening, and risks undermining investor confidence that the remainder of the fiscal consolidation plan, in which the Chancellor has set such store, will be delivered.
“Having set out his fiscal consolidation plan, it is important that Chancellor George Osborne resist the temptation to engage in any significant net giveaway in the Budget.”