Setback as industrial output tumbles in sector

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hopes that the manufacturing sector could lead the economic recovery have been dealt a blow by an unexpected fall in industrial output.

Official data show that output shrank 0.6 per cent on the month in November, against forecasts for an unchanged reading.

The figures from the Office for National Statistics confirm recent weak business surveys and boost concerns that Britain is slipping into recession, giving the Bank of England more reason to inject fresh stimulus into the economy to support growth.

Howard Archer, chief UK economist at IHS Global Insight, said: “Hopes that the manufacturing sector could see extended healthy growth and help the economy to see more balanced activity now seem a distant memory.

“Indeed, the danger is now that the sector is leading the economy into recession.”

The ONS said the fall in industrial production was driven by a decline in oil and gas extraction, and lower electricity production caused by unusually warm weather in November.

Manufacturers have been one of the few bright spots of Britain’s sluggish recovery, but they have been hit by turmoil in the country’s main trading partner, the eurozone.

Their woes are compounded by cuts in government spending and thriftiness of cash-strapped and downbeat consumers.

Mr Archer said: “The overall impression is that manufacturers ended 2011 under serious pressure and face a difficult start at least to 2012.

“Domestic demand for manufactured goods is being pressurised by the current still serious squeeze on consumers’ purchasing power, reduced public spending and less favourable inventory developments.

“Meanwhile, muted global economic activity – particularly in the eurozone – is clearly limiting manufacturers’ export orders while the eurozone crisis is additionally causing major uncertainty for manufacturers and weighing down on confidence.

“One area of relief for manufacturers is that input prices are now declining after surging earlier in 2011.”

George Kilburn, chief executive of the Company of Cutlers, which represents manufacturing firms in South Yorkshire, offered some regional insight.

He told the Yorkshire Post: “In an extremely difficult environment there are manufacturers here in this part of the world that through innovation and good practice are doing well.”

A survey from the Leeds, York and North Yorkshire Chamber of Commerce showed that manufacturing exports rebounded in the fourth quarter of 2011 after slowing down during the previous three months.

“Confidence is the biggest problem for businesses as we head into 2012,” said the chamber.