Manufacturing weaker than expected

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The Independent Online

Fears over the pace of the economic recovery in the UK were fuelled today by weaker-than-expected manufacturing figures.









Industrial production, which includes sectors such as mining and energy supply, grew 0.3% month-on-month in March, while manufacturing output edged ahead 0.2%, the Office for National Statistics said.



Economists were expecting growth of 0.8% and 0.4% respectively.



The lower-than-forecast month-on-month growth was driven by declines in the production of consumer durables, such as computers, white goods and phones, and capital goods, such as machinery.



The mediocre performance will raise concerns over the economy's ability to withstand the Government's fiscal squeeze and comes a day after the Bank of England slashed its growth forecasts for the UK.











Today's figures came as the International Monetary Fund (IMF) warned the UK faces considerable uncertainty and "strong headwinds" from the fiscal squeeze.



Government cuts and higher household debt will hold back growth to around 1.7% in 2011 and 2.3% in 2012, the IMF said, in line with yesterday's forecasts from the Bank of England.



Chancellor George Osborne has singled out the manufacturing sector for praise on more than one occasion, including yesterday in a speech made to the Institute of Directors.



But recent surveys, including today's figures, suggest the growth seen earlier this year is coming off the boil.



Howard Archer, chief UK and European economist, said: "There is significant concern that manufacturers will find life increasingly challenging over the coming months as stock rebuilding wanes and tighter fiscal policy weighs down on domestic demand."



Mr Archer warned rising oil prices could impact global demand for British products.



He added: "Furthermore, high oil prices and elevated input costs are a serious problem for UK manufacturers by substantially squeezing their margins and putting pressure on them to raise prices and risk losing business."



Manufacturing companies were benefiting from decent orders both at home and overseas, the competitive level of the pound and an ongoing rebuilding of stocks after they had been slashed during the recession.



Business leaders said more needed to be done to strengthen the manufacturing sector in the wake of today's figures.



David Kern, chief economist at the British Chambers of Commerce (BCC), said: "With the financial sector likely to remain weak, a sustained economic recovery largely depends on a rebalancing towards manufacturing.



"As the manufacturing sector will play a key role in driving exports and innovation, more needs to be done to make sure the pace of growth improves.



"Although we have seen progress in manufacturing in the last year, the most recent figures have been disappointing, and the upturn in output must accelerate.



"While British businesses support the Government's measures aimed at reducing the deficit, more effort must be made to enable private-sector firms, particularly small and medium-sized businesses, to invest, export and create jobs."

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