Factory figures raise triple-dip recession fears


Annabelle Dickson
Friday 11 January 2013 12:46

Fears Britain is heading for a triple-dip recession have been fuelled by figures showing manufacturing output shrinking unexpectedly in November.

Factory output fell 0.3% month-on-month on the back of a 1.3% decline in October, the Office for National Statistics (ONS) said.

The wider measure of industrial production edged up 0.3% but was below forecasts for a 0.8% rise.

The numbers add to a recent flow of disappointing economic data, stoking concerns of a fresh contraction in the fourth quarter and that the UK economy could be on the verge of recession again if activity remains under pressure in the first quarter of the year.

Chris Williamson, chief economist at Markit, said: "There are signs that the situation in manufacturing improved in December but a deteriorating trend in the far larger services sector and forecasts of heavy snow for January have raised the possibility that the economy could contract in the first quarter, meaning the country slid into a triple-dip recession."

The industrial figures are seen as particularly disappointing given the 11.3% rebound in oil and gas production thanks to a North Sea oil field reopening after extended maintenance shutdown.

The figures also confirmed the tough conditions for construction firms. Output in the sector fell 9.8% year-on-year in November.

Last week survey data suggested the services sector shrunk in December for the first time in two years.

Economists also warned this week that the trade deficit, which narrowed in November, has not improved enough and will act as a drag on GDP in the fourth quarter.

There was however a glimmer of hope for manufacturing. A recent Markit/CIPS purchasing managers' index suggests a return to growth last month for the first time since March and would be the highest reading since September 2011.

Howard Archer, chief UK and European economist at IHS Global, said manufacturing still faces tough domestic and global conditions.

"Domestic demand for manufactured goods is handicapped by current muted investment intentions and tightening public spending. Furthermore, consumers' purchasing power is coming under renewed pressure from a move back up in inflation and muted earnings growth," he said.


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