Tuesday lunchtime business bulletin

Jun 10 2008 By Andrew Mernin

Pressure on housebuilding shares intensified today after sector-wide downgrades from investment bank Goldman Sachs.

The Royal Institution of Chartered Surveyors (RICS) added to the pain by revealing members sold an average of 17.4 homes in the past three months, the lowest since records began in 1978.

The FTSE 100 Index reflected the general nervousness over economic conditions - falling 23.9 points to 5853.7 by mid-morning, led by Charles Church owner Persimmon after a drop of 5% or 23.25p to 405.5p.

In the FTSE 250 Index, Barratt Developments and Redrow were also sharply lower after downgrades by Goldman - falling 11p to 109.75p and 14.75p to 182.75p respectively.

The fall-out from the RICS report meant mortgage lender Alliance & Leicester eased 9.75p to 354.64 and Lloyds TSB dipped 6.25p to 350.5p, although the performance was not as bad as earlier in the session.

Manufacturing output saw an unexpected rise in April as an increase in aircraft and car production boosted activity, official figures showed today.

The Office for National Statistics (ONS) revealed that manufacturing output rose 0.1% in April, reversing some of March’s shock 0.5% decline.

The month-on-month increase was better than expected by most economists, who had pencilled in no growth amid the wider economic woes.

Experts said today’s better-than-expected manufacturing figures could further push back any interest rate cuts.

Robust retail sales data in May also out today from the British Retail Consortium (BRC) have added to predictions that the Bank of England will hold off from any further monetary easing.

Howard Archer, economist at Global Insight, said: ``The modest rise in manufacturing output in April, coupled with the firmer BRC retail sales survey for May, further dilutes the case for an interest rate cut any time soon."

Soft drinks group AG Barr today said a strong sales performance by Irn-Bru drove a 4% revenues improvement between February and late April.

The Cumbernauld-based firm said it was pleased with the figure given comparisons with a year earlier, when warm weather and promotions caused an 11% jump in revenues over the same 13 week period.

As well as flagship product Irn-Bru, Barr said the improvement in the first three months of its financial year reflected recent additions to its portfolio - energy drinks Rockstar and Vitsmart and sports product Taut.

There was also a greater contribution from its St Clement’s fruit drinks and smoothie range.

Barr said margins were holding up well, with continued pressure from rising raw material prices offset by price increases and further improvements in material usage.

The pound at noon was US$1.9567 compared to US$1.9746 at the previous close while the euro at noon was £0.7925 compared to £0.7961 at the previous close.