"Manufacturing output might well fall for the remainder of this year," said Adam Cole at brokers James Capel.That bodes well for the outlook for prices. "Core" output price inflation fell to 2 per cent, returning to the mid-1994 trough and the lowest since the 1960s.Yet manufacturing output was flat in May despite price discounting. The combination of falling materials costs and weak demand is expected to keep factory gate inflation low.. Although 0.3 per cent higher in the three months to May compared with the previous three, it remained at the same level as a year earlier. Many City economists believe the Chancellor will exploit the window of opportunity to reduce the cost of borrowing "He has the luck of the devil with the figures," said David Hillier, an economist at BZW, predicting a further reduction in base rates when Mr Clarke meets the Governor of the Bank of England at the end of this month.The year-on-year decline of 4.8 per cent in "core" costs - excluding food, drink, tobacco and petroleum - was the lowest figure since the mid- 1980s.Prices that manufacturers charged at the factory gate fell in June for the second month running, declining 0.2 per cent compared with May. The latest evidence of the stagnation in manufacturing came on the eve of publication of the Treasury's summer forecast, which will make it clear that Chancellor Kenneth Clarke's leeway for tax cuts in the next Budget will be tiny. My guess is that we could go down another 100 points over next the few days." an investment strategist at Dean Witter said..

The path to a further cut in interest rates was cleared yesterday by figures showing that manufacturing output was flat in May, while both the cost of materials and prices charged at the factory gate declined last month. Roy Blumberg, Josephthal Lyon & Ross' chief investment strategist, said: "It continues to be a hangover from Friday's activity. People were surprised how strong the employment report was and the implications for inflation and interest rates." The Dow industrials shed 37 points to about 5,551 after tumbling 115 on Friday after a strong June payrolls report.Losers outpaced gainers 16-7 on moderate NYSE volume of about 365 million shares, up from Friday's anaemic 181 million shares in an abbreviated trading session."People are back to work and I think they're still concerned about what's going on. The offer of 351 million shares includes 46 million to be used to stabilise the market.BZW is to allocate the shares according to price but with special preference for large investing institutions that will be long-term holders..

NEW YORK - Blue chips resumed Friday's slide yesterday as more traders returned from an extended 4 July holiday and found little incentive to buy amid nervousness over the economy's strong rebound. After Sir Bruce's protests, Standard agreed not to sell the shares as a block to another investor or through a bought deal by an investment bank.Instead they are to be marketed in an international offer by BZW, which is selling 29 per cent of the bank for Standard, which is keeping another 2.5 per cent as an investment. Though ageing and nearly blind, Mr Kirch cuts a powerful figure on the German media scene. A close friendship and association with Chancellor Helmut Kohl makes him arguably a better ally than Bertelsmann's Michael Dornemann BSkyB looks like confounding the sceptics yet again.. Bank of Scotland yesterday made clear that any potential predator would be firmly rebuffed, as it began a two-week international roadshow to help Standard Life sell pounds 840m worth of its shares to institutions. Sir Bruce Pattullo, governor of Bank of Scotland, said: "If there is a predator they know they are going to have a pretty hostile fight and that it's probably not worth it at the end of the day." When Standard Life announced it was selling most of its 31.5 per cent stake in Bank of Scotland, Sir Bruce reacted angrily to the surprise news that his largest shareholder was bowing out.But the hatchet has now been buried.

That either suggests he will bring to the job the sure-footedness that British Gas's PR has long cried out for or that he is labouring under a massive misapprehension.BSkyB set to confound scepticsSam Chisholm at BSkyB and his alter ego at News Corp, Rupert Murdoch, are hardly the types to sit back and let the grass grow under their feet. With the original push into continental European digital television via a joint venture with Bertelsmann among others now all but dead and buried, they've hot-footed it to the competition, the Bavarian media tycoon Leo Kirch.If all goes according to plan, and this time they are hoping it will, BSkyB ends up with 49 per cent of Kirch's digital enterprise plus an option to take 25 per cent of his sports channel, which has just clinched rights to the World Cup. No money changes hands for the time being but Sky is required to put up an unspecified proportion of the development capital. This is high-risk stuff, a bit like Sky itself in the early years, but it does demonstrate both a determination and an ability to move beyond the narrow confines of domestic franchise.

But it is entirely appropriate that he be paid a king's ransom since, as is so often the case, the scale of his task is likely to run in inverse proportion to the prospects for the company.Mr Lewis says he was drawn by the excitement and challenge. We do not know exactly what Mr Lewis will earn since he will not be on the board and his salary will not therefore be disclosable. What it will have is pounds 40bn of liabilities in the shape of British Gas's North Sea take-or-pay contracts and a declining market share as the domestic gas business is opened to full competition from 1998. The distinction for Mr Lewis is that he will have to earn his crust since the words poisoned and chalice might have been invented for the role he is taking on.If and when British Gas is demerged, BGE will be the poor relation to the pipeline business TransCo.It will not make much money, it will not pay any dividends, and it may not make it into the Footsie. He is also presumably very nicely off thank you, having been tempted away from the top PR job at NatWest to join the gasmen.With his arrival in September, British Gas will be full of more spin doctors than you can shake a stick at, though so far the weight of numbers does not seem to have helped very much. Managements need to be persuaded to come up with long-term objectives and targets, then they need to backed with a degree of patience and commitment that is capable of ignoring even a lengthy blip in the share price.That's the real way forward and although it may seem like a naive dream, it's a good sight less naive than the investor who continues to think that acquisition strategy is a reasonable substitute for hard graft, vision and a proper sense of business purpose and goals.A king's ransom at British Gas EnergySimon Lewis, the newly named director of corporate affairs for British Gas Energy, is variously described as suave, arrogant, politically ambitious and tall, though not necessarily in that order. Long-term shareholders - and the City is meant to be full of them these days - ultimately gain very little from consolidating mergers.