Industries face bumpy road out of recession
Oct 7 2009 by Iain Laing, The Journal
A SURPRISE fall in manufacturing output during August has underlined the fragility of the UK’s pull-out of recession.
The 1.9% slide – the worst performance since January – comes 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%, said the Office for National Statistics (ONS).
Experts said the figures meant a return to growth for the economy between July and September was now less certain.
Alan Hall, region director at manufacturers organisation EEF, said: “Today’s manufacturing figures reinforce our view that the road out of recession is set to be a bumpy one. Companies have been making significant inventory adjustments, but signs of a sustained turnaround in demand remain elusive.”
Capital Economics’ Vicky Redwood said: “August’s dismal industrial production figures will dampen recent optimism about the economy’s apparent bounce-back.”
The downbeat data follows a disappointing survey from the Chartered Institute of Purchasing & Supply’s (CIPS) activity index for September.
This edged down to 49.5, from 49.7 the previous month – signalling a decline in output after 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 three-monthly figures however showed no change in manufacturing output in the three months to August compared with the previous quarter.
IHS Global Insight’s Howard Archer 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.
“If a significant bounce back in production fails to materialise over September and October, concern will mount substantially over the state of the manufacturing sector and its prospects,” he said.
David Kern, chief economist at the British Chambers of Commerce (BCC), called on Bank of England policymakers to raise the scale of the current efforts to boost the money supply to £200bn at their meeting this week.
