Manufacturing production falls

Manufacturers suffered a blow today as official figures showed a return to falls for the sector.

Figures from the Office for National Statistics (ONS) showed production dropped 0.5 per cent between April and May.

The downturn was extended into April as figures for that month were revised down from 0.2 per cent growth to 0 per cent.

Economists, who had predicted a rise for the sector in May, were taken by surprise by the figures.

They said the reversal in manufacturing growth was "disappointing" and would lead to renewed fears that the economy as a whole had continued to slump.

In its three-monthly figures, the ONS said production decreased by 1.2 per cent. But this was compared with a 2.9 per cent decrease in April.

Howard Archer, of IHS Global Insight, said the result undermined hopes that the economy may have avoided contraction in the second quarter and "offers a clear reminder that the economy is still in a very fragile state despite improving significantly from the lows seen in the first quarter".

He said manufacturers still faced "serious obstacles" and that sustainable growth may be out of reach of the sector for some time to come.

Manufacturers have been helped somewhat by their practice of de-stocking and a more competitively priced pound.

But the sector still faces challenges from reduced demand.

The ONS said the most significant decreases were 2 per cent in the paper, printing and publishing industries and 1.7 per cent in machinery and equipment.

James Knightley, of ING, said the 2 per cent drop for publishing was "presumably because of growing use of electronic music files".

He said that, while the drop was a disappointment, there was still "hope that the worst is over for the sector" based on recent positive in survey data.

"With monetary policy remaining very loose and sterling weakness set to provide ongoing support, we believe that the sector can return to positive year-on-year growth late next year," he added.