Manufacturing worst since 1948

Feb 11 2010 by Iain Laing, The Journal

AN end-of-year surge in activity failed to prevent the UK manufacturing sector from recording its worst year since records began in 1948.

The Office for National Statistics (ONS) said manufacturing output slid 10.5% in 2009, despite a month-on-month rise of 0.9% in December.

This followed a gain of 0.2% in November and fuelled expectations that the beleaguered sector is showing signs of life after a dismal 2008 and 2009.

Today’s figures were better than expected, although analysts said they are unlikely to alter the recent GDP estimate of 0.1% in the fourth quarter.

Jonathan Loynes, of Capital Economics, said: “The numbers provide hope that the recovery in the manufacturing sector is picking up some steam again after stalling a bit over the previous few months.”

He said the sector is starting to feel the benefits of the drop in the pound and a pick-up in overseas activity.

But Mr Loynes added: “With industry accounting for only 17% of GDP, even a rapid recovery won’t offset the likely weakness of the household and public sectors.”

The wider industrial production sector, which includes utility and mining activity as well as manufacturing, saw growth of 0.5% in December, although output still fell by 10.2% for the year as a whole.

Hetal Mehta, senior economic adviser to the Ernst & Young Item Club, said the main driver of the recent improvement appeared to be export demand.

She added: “The turning of the stock cycle and the car scrappage scheme will help to boost output in the very near term, and looking further ahead, we believe that strengthening export demand combined with weak sterling will be a key factor behind a gradual pick up in the manufacturing sector.”