UK manufacturing output stagnates

Struggling manufacturers cast further doubts over the strength of the recovery today after official figures showed output stagnating in October.

The lack of growth disappointed expectations of a modest rise, while wider industrial output including mining and utilities was also flat over the month.

September's bounce back from a 2 per cent fall in manufacturing output during August was also revised down to 1.5 per cent by the Office for National Statistics (ONS).

IHS Global Insight's Howard Archer said: "This highlights the fact that the UK still faces a difficult battle to develop a sustainable, significant recovery."

The figures showed rises for chemicals, machinery and equipment firms cancelled out by falling output among electrical manufacturers as well as printing and publishing firms.

Manufacturing output overall was 7.8 per cent below a year earlier - an improvement on September's figure but nonetheless representing an 18th successive month of year-on-year decline.

Uncertainty over manufacturing prospects has also been seen in recent survey data, with the Chartered Institute of Purchasing & Supply's closely-watched activity index signalling slowing growth in November.

UK firms have been helped by a weaker pound, record low interest rates and measures such as the scrappage scheme to boost the flagging car industry, but tax hikes and spending cuts loom next year to threaten recovery.

Flat industrial production also damages hopes that the sector will make a significant contribution to an expected pull out of recession in the final quarter of 2009, Mr Archer added.

"The sector is currently seeing limited recovery at best and is far from racing ahead.

"Serious doubts remain about the strength of demand for manufactured goods over the medium term, particularly once stimulative measures start being withdrawn," he said.

The CBI business group added to the nerves over manufacturing as its industrial trends survey showed firms expecting a fall in output over the next three months.

A balance of 7 per cent of firms expect lower output, the CBI said, despite more optimistic signals from its previous two monthly surveys.

Chief economic adviser Ian McCafferty said: "Manufacturing prospects were starting to look up but have dipped again in this latest survey. Output had been edging higher after the rapid stock depletion earlier this year.

"But with demand moving only slowly in the right direction, order books remain very weak and firms now expect production will fall back slightly in the next three months."

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