Manufacturing suffers worst month for more than five years, official data shows

Output from firms fell 1.4 per cent in the month according to the Office for National Statistics, the worst performance since October 2012

UK manufacturing had its worst month in more than five years in April, flying in the face of hopes that the first quarter’s GDP slump was a snow-induced blip.

Output from firms fell 1.4 per cent in the month according to the Office for National Statistics, following the 0.1 per cent decline in March. City analysts had expected a 0.3 per cent expansion.

It was the worst monthly performance since October 2012.

The ONS added that there was “widespread weakness” in the sector, with nine of the 13 sub-sectors showing a decline.

The wider industrial sector, which includes energy firms, saw an 0.8 per cent fall, following a 0.1 per cent expansion in March.

Dave Ramsden, the deputy governor of the Bank of England, said last week that recent survey data was supporting the Bank’s view that GDP growth would bounce back strongly in the second quarter.

But the latest report on manufacturing, which accounts for 10 per cent of UK GDP, suggests otherwise.

The pound fell sharply in the wake of the figures, dropping to $1.3373, down 0.3 per cent on the day, as traders scaled back their bets on an August interest rate hike from the Bank.

Weakest since 2012

Construction output was also weaker than expected according to the ONS, growing by just 0.5 per cent, following the 2.3 per cent slump in March.

Rounding off a hat-trick of disappointing news, the ONS separately reported that the goods trade deficit was wider than expected in April at £14.03bn, rather than the £11.35bn City analysts had pencilled in.

On a three-monthly basis, the value of goods exports, excluding erratics, was down 3.7 per cent, while imports fell 2 per cent.

Liam Fox, the international trade secretary, pointed to a rise in exports on a year-on-year basis.

“Far from the gloom some people report, today’s trade figures show in the year to April 2018 the trade deficit narrowed by £6.7bn as overall exports rose by 7 per cent,” he said on Monday.

However, most analysts said the trade figures were not encouraging.

“It is possible that the UK is now moving past the recent sweet spot for exporters, with growth in key markets moderating and the impact of the post-EU referendum slump in sterling, which has helped some exporters, subsiding. The possibility of an escalating trade war has added to the downside risks for exporters,” said Suren Thiru of the British Chambers of Commerce.

The ONS’s analysis of the economy in 2018 has been at odds with the Bank of England’s, with the statistics agency identifying underlying weakness, but the Bank attributing the slowdown almost entirely to the “Beast from the East” snowstorms of February and March.

The Bank held off from raising interest rates in May, saying it would wait to see if its more optimistic view would be bourne out.

In the first quarter, GDP growth is estimated to have slumped to just 0.1 per cent, with manufacturing growing by 0.2 per cent, services by 0.3 per cent and constriction slumping by 2.7 per cent.

Howard Archer, chief economic advisor to the EY Item Club, said: “The very poor set of April industrial production, construction output and trade data can only fuel Bank of England concerns and uncertainties over the economy and there can be no doubt that the [Bank’s Monetary Policy Committee] will leave interest rates unchanged at their June meeting next week.

“The data also make an August interest rate hike by the Bank of England look a lot more questionable.”

The National Institute of Economic and Social Research estimated on Monday that the UK’s GDP growth rate was still only 0.2 per cent in the three months to May.