British industry shocks with May slump in output

Chancellor George Osborne promised to promote a “march of the makers” three years ago
Manufacturing output slumped in May, according to unexpectedly poor figures yesterday, running against private surveys which had suggested that UK industry was surging ahead two months ago.

Total industrial production dropped by 0.7 per cent in the month to May, while manufacturing alone saw a deeper contraction of 1.3 per cent.

Factory output has not dropped so steeply for nearly a year and a half, dating back to the beginning of 2013.

Although both industrial production and manufacturing have still grown in comparison to May last year, up by 2.3 and 3.7 per cent respect­ively, the figures are much less strong than those expected.

Of the manufacturing sub-sectors, 10 of 13 added to the drop in May. Overall industrial production and manufacturing are still depressed in comparison to their pre-crisis peak levels, 11.3 per cent and 7.2 per cent respectively below 2008 levels in terms of output.

“The fall was broad-based amongst the sub-sectors of manufacturing, indicating that a common factor – most likely sterling’s appreciation – was probably responsible,” said Samuel Tombs of Capital Economics.

Most analysts suggested that the fall might be transitory. Chris William­son, chief economist at Markit commented: “The more stable three- month trend rate of growth in the official data remains historically strong at 1.1 per cent, which is broadly in line with the PMI survey.”

Williamson added: “Although down from 1.9 per cent in the three months to April, this easing will not worry policymakers unduly, unless of course it is followed by a further slump in June.”

In May, the manufacturing purchasing managers’ index (PMI) published by Markit and the Chartered Institute for Personnel and Supply (CIPS) reached a score of 57. Though the reading was marginally below the 57.3 recorded in April, the survey still signalled strong growth with a figure far above the neutral 50 mark.

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