Shock fall in manufacturing output revealed

ONS figures show 1.9% slide during August, undermining recovery hopes

By Russell Lynch

Published:

A surprise fall in manufacturing output during August underlined the fragility of the UK’s pull out of recession yesterday.

The 1.9% slide – the worst performance since January – came after two months of growth and confounded expectations of a 0.4% rise.

Overall output from the wider production industries, including mining, quarrying and utilities, fell by 2.5%, the Office for National Statistics (ONS) said.

Experts said the figures meant a return to growth for the overall economy between July and September was now less certain. Vicky Redwood, at Capital Economics, said: “August’s dismal industrial production figures will dampen some of the recent optimism about the economy’s apparent bounceback.”

The downbeat data follow a disappointing survey result from the Chartered Institute of Purchasing and Supply's (Cips) activity index for manufacturing in September.

This edged down to 49.5, from 49.7 the previous month, signalling a deepening decline in output after previous improvement.

August’s figures showed significant declines in machinery, chemicals, electrical and paper and printing output, despite sectors such as car manufacturing beginning to pull out of steep declines.

The ONS’s less volatile quarterly figures, however, showed no change in manufacturing output in the three months to August compared with the previous quarter.

Howard Archer, at IHS Global Insight, said the longer-term measure was more representative because gains in June and July reflected factories stepping up production before the August break, when output fell.

He is looking for a return to growth from manufacturers in the months ahead for evidence that conditions in the sector are improving.

British Chambers of Commerce chief economist David Kern called on Bank of England policymakers to raise the scale of the current efforts to boost the money supply to £200billion at their meeting this week. He said: “Higher unemployment is threatening the manufacturing sector’s skills base and the weakness in bank lending poses serious obstacles to a sustainable recovery.”