Factory data weak but UK set to grow

BRITAIN’S manufacturing output failed to grow in November, raising yet further concerns about the strength of the recession-hit producers and the sustainability of the UK’s still fragile recovery.

More positively, the wider industrial production measure managed to post a gain of 0.4 per cent, official data showed. But this was entirely a reflection of increased mining and extraction activity, fuelled by a rising oil price.

Economists also raised the uncomfortable issue of whether the industrial sector could sustain gains when stimulus is withdrawn, expected at some point in 2010.

Manufacturing output has been unable to expand in recent months, despite huge stimulus from a weak currency, loose monetary policy, the unwinding of destocking and a rebound in overseas demand.

Although RBC Capital Markets’ Richard McGuire warned there was little evidence that the production sector has entered a sustained recovery, November’s industrial production gains supported hopes that the UK economy would at last emerge from recession in the fourth quarter of 2009.

Britain is the only major economy still lingering in recession but it is expected that preliminary data released by the Office for National Statistics (ONS) on 26 January will show that the UK expanded in the last three months of 2009.

Benjamin Williamson, economist at the Centre for Economic and Business Research (CEBR), forecasts economic growth of around 0.7 per cent over the last three months of the year compared with the previous quarter.

Ross Walker, UK economist at RBS said: “Overall, the UK recovery continues to look fragile, but the proverbial green shoots are now beginning to surface.”