Weak industry figures dampen post-recession euphoria

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The Independent Online

The flagging health of Britain's manufacturers and builders will be under the spotlight this week as the Bank of England's rate-setters hunt for clues on the state of the economy.

The latest snapshots of both sectors' fortunes are likely to dampen any euphoria over the recovery following the UK's dramatic pull out of a double-dip recession between July and September, marking the strongest quarterly growth in five years.

The surprise 1 per cent expansion – albeit aided by a bounce-back from the Jubilee and Olympic ticket sales – has cast into doubt City expectations of more money-printing from the Monetary Policy Committee. But a significant weakening of more timely industry surveys, compiled by Markit and the Chartered Institute of Purchasing & Supply (Cips), could yet prompt the committee into action.

According to the ONS, construction output shrank 2.5 per cent in the last quarter, with a 1 per cent rise for manufacturers over the three months flattered by June's extra day off.

This week's Cips surveys are expected to show worsening conditions for both sectors as its activity indices dive further below the 50 no-change mark, signalling contraction.

Meanwhile the CBI's latest manufacturing survey reported a worrying collapse in domestic and export orders during October.

Philip Shaw, Investec chief economist, said: "UK trade figures are showing that export volumes to other EU economies have fallen by 4.5 per cent over the past year, a reminder of the dependence of British manufacturing on economic conditions in the euro area."