Manufacturing fall puts recovery in doubt

 

The 0.8 per cent fall in Britain’s manufacturing output during March has surprised City experts, who say it puts the UK's economic recovery in doubt.

The fall comes a month after manufacturing output rose for the first time since August with a month-on-month increase of 0.2 per cent during February.

Including the current downturn, the output figure for the three-month period to the end of March is now 1.5 per cent lower than the previous quarter. It is 6.5 per cent lower than a year earlier.

Philip Shaw, economist at Investec bank, says: "This is a major shock given recent survey evidence had suggested manufacturing was rising out of recession.

"Now we are left with considerable uncertainty about whether it really is recovering and about the pace of the recovery in the economy as a whole."

HSBC economist John Butler believes it is still too early to abandon hopes of a sustained recovery in the performance of the sector.

But he says: "This vastly reduces the probability that the MPC will raise rates tomorrow and to some will increase the likelihood that the first rate hike is delayed until the fourth quarter."

Only last week a key industry barometer from the Chartered Institute of Purchasing & Supply reached its highest level for more than two years.

That was followed by CBI research on Tuesday suggesting that manufacturers believed the worst of the recession was now behind them.

But Engineering Employers' Federation chief economist Stephen Radley says the latest figures showed the economy is still a long way from safety, warning: "Whilst the market remains so uncertain, manufacturers cannot hope to raise their prices and rebuild their profitability."