Official data records ‘shock’ fall in manufacturing output and exports12 March 2013

Official UK manufacturing data from the Office for National Statistics (ONS) today shows both output and exports heading in a downward direction, raising fears of another recession.

The index of manufacturing fell by 3.0% in January 2013 when compared with January 2012, the largest downwards drift coming from pharmaceuticals and rubber & plastics products.

The mont-on-month index fell by 1.5% in January 2013 when compared with December 2012, with the manufacture of miscellaneous machinery and the manufacture of chemicals suffering the heaviest falls.

Commenting on the new data, EEF chief economist Lee Hopley said the first official statistics of the year failed to bring any sign of improvement in the UK's growth with both manufacturing output and goods exports down more than expected. Production across most sectors were struggling and export sales were weak in both European and non-EU markets. "Much of manufacturing is facing an uphill challenge to grow in a difficult global demand environment," she concluded.

EEF last week downgraded its growth forecast for manufacturing for 2013 to 0.3%, down from 0.7% it forecast in December.

Chris Williamson, chief economist at Markit, called the fall "a shock", adding that the data would pile more pressure on the Bank of England to inject more stimulus into the economy at its next policy meeting, and on the chancellor to accept that more needed to be done to boost growth in next week's Budget.

"With such a weak start to the year, the economy is facing an increased risk of falling into a triple-dip recession and the much-vaunted rebalancing remains elusive. In fact, recent data suggest the UK is moving in the opposite direction: away from goods production and is becoming ever-more dependent on consumer spending," said Williamson.

He added: "… whether another recession can be avoided is largely dependent on the far larger service sector, which is seeing reasonable growth compared to late last year. Although not a strong expansion, the uplift in services should be just large enough to offset the weakness in manufacturing as things stand at the moment."

Ken Hurst

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