THE economy faces a tough time ahead during the second half of 1998 when the manufacturing sector will fall to the brink of recession, according to the latest report from Oxford Economic Forecasting, writes Chris Koenig

But they predict the economy as a whole will be supported by strong consumer demand in the high street until June or July before declining.

The Oxford economists' full-year forecast for Gross Domestic Product (GDP) growth is 2.1 per cent compared with 3.3 per cent in 1997.

The report says: "Already struggling with a substantially over-valued currency, export-oriented manufacturers are now feeling the shock-waves of the Asian crisis - which not only implies weaker demand for UK goods from that region but also a squeeze on UK firms' market share and profit margins in the rest of the world as Asian companies seek to trade their way out of trouble."

The Oxford economists, who reckon that the Asian financial trouble will knock one per cent off UK exports and 0.5 per cent off GDP, are more upbeat about the prospects of service-oriented companies, particularly telecoms and financial sectors.

But they say that the manufacturing sector, particularly textiles, clothing, and mechanical engineering will be hit.

They say: "There are increasing signs that the sharp appreciation of sterling since late 1996 is at last biting hard."

Construction is expected to continue strongly throughout the year thanks only to private, not public, spending.

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