Expert warning after manufacturing slump

Experts have warned that any economic recovery in the UK will be short-lived after official figures today revealed a worse-than-expected slump in manufacturing.

Output in the manufacturing sector contracted by 1.1 per cent between July and August following a 3.2 per cent rise the previous month, the Office for National Statistics (ONS) said.

The manufacturing figures were dragged lower by a weak performance from transport equipment and machinery firms, which fell 4.5 per cent and 2.5 per cent respectively.

Samuel Tombs, UK economist at Capital Economics, said the economy should still emerge from its double-dip recession in the third quarter, but the underlying picture is weak.

He said today's figures suggested the underlying trend in gross domestic product (GDP) is "flat at best and therefore undermine hopes that the green shoots of economic recovery are emerging".

The wider index of production, which also includes mining and energy supply, shrank 0.5 per cent in the period, following a 2.9 per cent rise in July.

Within the index of production, the mining and quarrying sector rose by 1.4 per cent and the water and waste management sector rose by 2.1 per cent.

These increases were slightly offset by energy supply output, which dropped 0.6 per cent, driven by a 9.4 per cent drop in gas supply, the ONS added.

The August figures mark a sharp reversal of the growth seen the previous month, but July's data was boosted by a clawback from the losses suffered as a result of the extra bank holiday for the Queen's Diamond Jubilee in June.

The ONS added there was some anecdotal evidence that some businesses had longer summer closures this August, or that closures were held later than in previous years so that they affected August exclusively.

Howard Archer, chief UK and European economist at IHS Global Insight, said: "It is evident that manufacturers still face a tough environment.

"Domestic demand for manufactured goods is handicapped by current muted investment intentions, still-careful consumers - who still face significant pressures despite recent healthy jobs growth and lower inflation - and tightening public spending."

A recent purchasing managers survey for September also revealed signs of a struggle in the manufacturing sector.

The latest Markit/CIPS purchasing managers' index (PMI) produced a headline reading of 48.4 for September, below the 50 mark that separates expansion from contraction and down on the improved trend of 49.6 seen a month earlier.

The wider economy shrank 0.5 per cent between April and June, for the third consecutive quarter, confirming the double-dip recession as the longest since the 1950s.

PA