Manufacturing output down 1.3 per cent

7 December 2012
By Sofia Mitra-Thakur
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The ONS said factory output fell 1.3 per cent in October

The ONS said factory output fell 1.3 per cent in October

New figures show a steeper-than-expected drop in manufacturing output, fuelling fears that the UK is facing a renewed slump this quarter.

The Office for National Statistics (ONS) said factory output fell 1.3 per cent in October, far worse than the 0.2 per cent decline that analysts had been expecting.

The wider measure of industrial production fell 0.8 per cent, reflecting a record fall in oil extraction although this was partly due to maintenance on North Sea rigs.

The decline adds to the recent flow of disappointing numbers for the UK economy at the start of the fourth quarter and bodes ill for GDP after a rise of 1 per cent in the autumn ended the longest double-dip recession since the 1950s.

Markit chief economist Chris Williamson said: "Judging by the official data that we have seen for the fourth quarter so far, notably retail sales, trade and industrial production, the UK will struggle to avoid a renewed downturn in the economy after the brief return to growth seen in the third quarter."

The Office for Budget Responsibility this week slashed growth forecasts for the next five years and predicted a borrowing bill some £84 billion higher than its last estimate.

Mr Williamson added: "While a dip back into contraction may prove mild and short lived, the concern is that any new downturn will not only put further pressure on the UK's AAA credit rating but also provide a further set-back to a much needed improvement in business and consumer confidence."

The ONS said production was 3 per cent lower in October than the same month a year earlier while the figure for manufacturing fell by 2.1 per cent.

Samuel Tombs, of Capital Economics, said it seemed likely that industry will make a significant negative contribution to GDP in the fourth quarter.

He said: "Even if October's fall in production is reversed over the next two months, the sector will knock about 0.3 per cent off quarterly GDP growth.

"And we expect production to fall further in 2013 as the eurozone's recession deepens and high inflation holds back domestic consumer demand for manufactured goods."

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