UK's economic recovery seems to depend on the service sector as manufacturing output dropped in May

Manufacturing output drops despite expectations

UK’s economic recovery seems to depend on the service sector as manufacturing output dropped in May while UK’s trade deficit kept rising.

After a 0.2 per cent factory production decrease in April, May saw the output dropping by further 0.8 per cent, according to the Office for National Statistics (ONS), which announced at the same time the country’s deficit have risen to £8.5bn.

Metal production, electricity and gas supply and pharmaceuticals were named among the sectors that contributed the most to the overall decrease. On the other hand, mining and quarrying industry, water and sewerage, as well as food, drink, tobacco and chemicals production displayed signs of growth.

Overall, production in May was 2.9 per cent lower compared with the same period last year.

The quarterly data suggest that after an uptick in March, manufacturing over the latest three months remained 0.3 per cent above the previous quarter but down 2.9 per cent compared with 2012. However, the ONS cautioned the difference might be partly due to the shift in bank holiday dates in 2012.

The data came as a surprise as positive signals had been reported from throughout the economy previously.  Samuel Tombs, of Capital Economics, said the figures were disappointing and "indicate that the overall recovery is still largely dependent on the services sector".

"A more sustained and healthy recovery will require exports and industry to revive too," he said.

The trade deficit has risen from April’s £8.4 billion to £8.5 billion in May. The overall deficit was GBP2.4 billion, up from £2.1 billion. This took into account a £6.1 billion surplus in services, a fall from £6.4 billion in April.

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