Fears over UK economy intensify as manufacturing output plunges
FEARS over the state of the UK economy intensified yesterday when official data revealed the sharpest monthly drop in manufacturing output since October 2012.
UK manufacturing output plummeted by 1.4 per cent month-on-month in April, the Office for National Statistics data showed. Economists had forecast a 0.3% rise. The ONS cited “widespread weakness throughout the sector”, on domestic and export fronts. Nine of 13 manufacturing subsectors showed a decline in output in April.
The plunge in manufacturing output in April followed a 0.1% fall in March, and was the third consecutive monthly decline. It raised doubts over whether the UK economy can achieve any particularly meaningful improvement in growth this quarter.
UK growth almost ground to a halt in the first quarter, as underlying economic weakness resulting partly from Brexit issues was exacerbated by freezing temperatures and heavy snow. Gross domestic product rose only 0.1% quarter-on-quarter in the opening three months of this year, ONS figures show.
The National Institute of Economic and Social Research think-tank estimated yesterday that UK GDP in the March to May period would have been up just 0.2% on the preceding three months.
Amit Kara, head of UK macroeconomic forecasting at the NIESR, said: “We estimate that output expanded by just 0.2% in the three months to May 2018, which is around half the potential growth rate of the economy. Economic growth has slowed materially since the start of this year and it continues to remain weak.”
He added: “One reason for sluggish growth is the disruption caused by severe weather in March, particularly to the construction sector. The latest data also shows a notable slowdown in manufacturing sector output that appears to be driven by both domestic and external conditions.”
UK manufacturing output in the February to April period was down by 0.5% on the preceding three months, yesterday’s ONS figures showed.
Broader UK industrial production, which includes mining and quarrying, oil and gas extraction, and electricity, gas and water supply as well as manufacturing output, fell by 0.8% month-on-month in April, according to the ONS figures. Economists had forecast a 0.1% rise. And industrial production fell sharply in spite of an 8.4% month-on-month jump in oil and gas extraction in April.
The weak economic data weighed on the pound. Sterling was last night trading around $1.3384, down by more than 0.2 cents on its pre-weekend close in London.
Separate figures from the ONS yesterday showed the UK’S global goods trade deficit widened from £12 billion in March to £14.04bn in April, much worse than the £11.35bn forecast by economists, as exports fell sharply and imports rose. The deteriora- tion was driven by a widening of the UK’S deficit on trade in goods with countries outwith the European Union, from £3.79bn to £5.37bn. This was much worse than the £3.2bn deficit forecast by economists.
Further data published by the ONS showed UK construction output rose by just 0.5% in April, having tumbled by 2.3% in March as freezing weather disrupted activity. Economists had forecast UK construction output would have bounced back by 2% in April.
Howard Archer, chief economic adviser to the EY ITEM Club think-tank, described the industrial production, trade, and construction figures from the ONS as “a miserable and thoroughly worrying set of UK data that fans concerns over the UK economy”.
He added: “While March’s poor performance had clearly been influenced markedly by the severe weather, there are few mitigating factors for a slump in UK manufacturing output in April, a tepid rise in construction output and a sharply widened trade deficit as exports nosedived. We have been expecting UK GDP growth to improve to 0.4% quarter-on-quarter in the second quarter, but the April industrial production, construction output and trade data make this look hugely optimistic.”
A miserable and thoroughly worrying set of UK data that fans concerns