Geopolitical concerns blamed for factory slowdown

THE MANUFACTURING sector confirmed its slowing pace of expansion today after posting growth of 0.3 per cent for the second month in a row.

The Office for National Statistics (ONS) said the figure between June and July was boosted by an increase in factory output of items such as pharmaceutical and electrical products as well as food and tobacco.

The modest increase further dented hopes that the UK’s factories are charging back to life, with the sector’s quarterly performance actually down by 0.6 per cent compared to the previous three months.

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Overall industrial output beat expectations to rise by 0.5 per cent in July after a 0.3 per cent gain in June, helped by a 3.6 per cent increase in electricity generation. Throughout the quarter industrial production fell 0.1 per cent on the previous three months.

Separate official data released today showed that the UK’s trade deficit hit its highest level for more than two years in July.

The latest figures from the ONS showed that the goods trade deficit hit £10.2bn, from £9.4bn in June.

The ONS said it was the widest monthly deficit since April 2012, with a rise in exports more than cancelled out by a greater rise in imports.

A strong pound has hampered overseas exports, although sterling has fallen this week due to a surge in the polls for Scottish independence.

Lee Hopley, chief economist at EEF, the manufacturers’ organisation, said the “weakness in overseas markets remains a drag”.

She added: “This could make sustaining growth more challenging going forward and it is therefore critical that efforts are maintained to keep growth on track in manufacturing and across the whole economy in the remaining months of this parliament.”

Markit chief economist Chris Williamson said production remains 7.2 per cent below its pre-recession peak, while he estimates that output is slowing down.

He said factories have struggled over the summer compared to the strong growth earlier in the year, partly as a result of geopolitical concerns in Europe as “jitters about the Ukraine had begin to hit trade flows”.