Unexpectedly high domestic spending allowed manufacturers to run down stocks in the second quarter of 1999, according to the Office for National Statistics.
Finished goods inventories were down £750m in the quarter to June, following a similar drop in the quarter to March. Total inventories for the manufacturing sector fell £972m.
The drop in stocks could leave the way open for economic growth in the third quarter if demand remains strong.
But manufacturers are not yet investing to meet rising demand. Manufacturing investment fell 2% in the second quarter of 1999 compared with the first quarter, down 12.6% on a year earlier.
The energy sector saw a 15.2% quarterly rise in investment to £91m, but metal goods fell 11.1% to £418m.
* The global automation software market is expected to be worth $3.6bn (£2.31bn) by 2003, double its current value, according to market research firm Datamonitor.
Conventional automation products will lose market share to software products, Datamonitor says. The chemical industry is the largest global end-user of automation software, while the motor industry dominates demand for manufacturing automation software.