"Horrible" setbacks for Britain’s builders and manufacturers shook the City today as a leading forecaster’s warning of a winter slump heightened fears of a triple-dip recession.
Manufacturing output slipped 0.3 per cent in November, confounding hopes of a 0.5 per cent bounceback from a dreadful October, the Office for National Statistics said. Construction firms also lost ground as output fell 3.4 per cent.
The National Institute for Economic and Social Research added to the gloom by warning of a 0.3 per cent dip for the wider economy between October and December as a post-Olympic hangover drags down the recovery.
Although NIESR believes underlying growth is flat, a negative result would mean the economy has shrunk for four of the last five quarters in another huge political embarrassment for the Chancellor, George Osborne. NIESR does not expect the UK to return to its 2008 pre-recession peak for another two years as the UK lags behind its international peers.
Investec’s chief economist Philip Shaw said of the manufacturing data: “These figures were horrible. It made sense to expect a rebound for manufacturers after a very weak October but we just didn’t get it.”
Vicky Redwood, the chief UK economist at Capital Economics, said: “The figures provide yet further evidence that the economy probably contracted in the fourth quarter... So a triple dip still seems to be looming.”
Overall industrial production, which also includes oil and gas extraction and mining, managed a 0.3 per cent advance. But this was again well short of City hopes and artificially boosted by the end of maintenance work on the Buzzard oilfield in the North Sea, which sent oil and gas production surging 11.3 per cent.
Britain’s manufacturing sector meanwhile is now 2.1 per cent smaller than a year earlier after November’s drop. The main culprits driving the latest fall were sliding production in food and chemicals.
The pound fell as much as 0.5 cents against the dollar following the figures as traders bet the poor news increased the chances of more money-printing from the Bank of England. Ms Shaw added: “It will make the Monetary Policy Committee more tempted to do QE but there have been brighter signs from the housing market and the Funding for Lending scheme is also having an impact on credit flows. The short-term inflation outlook is also poor. We expect it to hit 3 per cent this year.”
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