UK manufacturing fell more than economists forecast in August, adding to signs that the recovery continued to struggle in the third quarter.
Factory output fell 0.3 per cent from July, when it declined a revised 0.2 per cent, the Office for National Statistics said on Tuesday in London. The median forecast of 24 economists in a Bloomberg News survey was for manufacturing to fall 0.2 per cent. Overall industrial output, which includes mining and oil and gas, rose 0.2 per cent on the month.
The Bank of England reactivated emergency stimulus last week amid concerns the European debt crisis and slowing global growth threaten the UK recovery. The British Chambers of Commerce said on Tuesday the new round of so-called quantitative easing may not be enough and “more radical measures” are needed to prevent the economy slipping into recession.
“It’s not a great number and there’s no sign of these problems going away,” said Alan Clarke, chief UK economist at Scotia Capital Europe Ltd in London. “Manufacturers should be pretty cautious right now.”
The pound extended its decline against the dollar after the data were published. It traded at $1.5618 as of 9.51 am London time, down 0.3 per cent from yesterday.
THIRD MONTHLY DECLINE
The monthly decline in manufacturing was the third in succession and the biggest since April. Out of 13 categories, six rose and seven declined, the statistics office said. The decline was led by wood and paper products, basic metals and metal products. On the year, manufacturing rose 1.5 per cent.
The statistics office produced new categories within the manufacturing data. Consumer durables fell 0.5 per cent in August from July and capital goods slipped 0.1 per cent.
Overall industrial production fell one per cent in August from a year earlier, according to the statistics office. Under new weightings, production accounts for 15.4 per cent of the economy, while manufacturing makes up 10.3 per cent.
The Bank of England, which left its benchmark interest rate at a record-low 0.5 per cent on October 6, raised the ceiling for QE to £275 billion ($430 billion) from £200 billion. That’s the biggest expansion since the first round of stimulus in March 2009.
Bank of England policy maker David Miles said late yesterday that recent economic news has been “overwhelmingly negative” and sentiment in financial markets has deteriorated.
“There doesn’t seem to be much of a glimmer on the horizon for manufacturers,” said Philip Shaw, chief economist at Investec Securities in London. He expects a further £50 billion expansion of QE in February.
Britain’s economy grew just 0.1 per cent in the second quarter, less than previously estimated, raising concern the UK economy may be headed for another recession. Smiths Group Plc Chief Executive Philip Bowman said on September 28 that the “economic outlook remains uncertain.”
A BCC survey on Tuesday showed measures of domestic and export sales at manufacturers and services companies declined in the third quarter. Confidence also fell.
