Alarm bells ringing as industrial output disappoints

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Fears over the outlook for UK manufacturers were raised yesterday as official figures revealed a worse-than-expected monthly performance.

Manufacturing output rose 0.1 per cent between August and September, the Office for National Statistics (ONS) said, following a 1.2 per cent fall the previous month and compared to City expectations of a 0.3 per cent rise.

A strong performance from pharmaceutical and transport firms was overshadowed by falls in the manufacture of machinery, chemical products and wood, paper and printing.

Meanwhile, the wider index of production fell 1.7 per cent month-on-month as the mining and quarrying sector plunged 15.3 per cent due to a drop in maintenance-hit oil and gas extraction.

While the weak performance is not enough to trigger a downward revision to the initial estimate that gross domestic product grew 1 per cent between July and September, it sounded alarm bells among economists over the future for manufacturers.

Samuel Tombs, UK economist at Capital Economics, said the figures suggested “the economic recovery is quickly losing momentum again” and “the manufacturing sector is still struggling”.

The economy returned to growth in the third quarter, ending the longest double-dip recession since the 1950s.

The largest contribution to the surge came from the powerhouse services sector, which makes up around 75 per cent of the total economy and grew at 1.3 per cent, following a 0.1 per cent drop in the previous quarter.

Industrial production, which after yesterday’s figures is expected to have grown by 0.9 per cent between July and September, also helped lift the economy out of the mire.

But economists warned the figures suggested this was not likely to last.

David Kern, chief economist at the British Chambers of Commerce, said: “Longer term trends in manufacturing still show a decline over the year and prospects over the month ahead are challenging.

“In the face of tough fiscal austerity at home and difficult problems facing our trading partners in the eurozone, manufacturers and businesses in other sectors will have to adjust to a difficult reality of weaker growth prospects.”

Elsewhere, energy supply output rose by 0.5 per cent between August and September.