Economic recovery less clear as industry output falls

Surprising new ONS figures show manufacturing predictions were overly optimistic.

Surprise factory output fall
While UK car production jumped in February 2012, other sectors have stalled and shrunk. Photo: Getty Images

New factory figures released by the Office of National Statistics (ONS) cast a shadow over hopes for the economy, following recent expectations the UK was on track to avoid a double-dip recession.

The Index of Manufacturing fell by 1 per cent between January and February this year; the largest monthly fall for 10 months. Manufacturing output was 1.4 per cent lower in February 2012 than the same month a year ago. The figures are at odds with recent suggestions the sector would grow by 0.1 per cent over both the monthly and annual period.

The Index of Production fell 2.3 per cent in February 2012 on the same month the year before; the last time that it rose. Production was up 0.4 per cent from January to February earlier this year, largely from the mining and quarrying, gas, electric and water sectors.

Samural Tombs, an economist at Capital Economics said:

February's terrible industrial production figures put something of a dent in hopes of a decent increase in GDP in the first quarter. Output has now fallen in four of the last five months, in contrast to the expansionary picture painted by the survey.

Tombs said that hopes the manufacturing sector could drive the British economy to sustained recovery were "rapidly fading". Howard Archer at IHS Global Insight pointed to limiting export orders in the eurozone as well as continued stagnation in UK consumer purchasing. "Domestic demand for manufactured goods is still handicapped by a still appreciable squeeze on consumers' purchasing power as well as by tighter public spending," Archer said.