Mining slump drags down UK output

Tim Wallace
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MANUFACTURING in the UK barely increased in July, according to new figures out today, and industrial output as a whole declined.

The 0.1 per cent rise in manufacturing continues the year’s volatility – output fell by 0.4 per cent in June and increased by 1.8 per cent in May.

Output over the three months to July was up 2.3 per cent on the same three months in 2010, data from the Office of National Statistics (ONS) showed.

Overall industrial production fell 0.2 per cent in July, though. Mining led the decline, with output falling by 1.4 per cent on the previous month. Utilities also slumped, with 1.1 per cent off production.

Good news came from the textiles industry, with leather and clothing sales up 3.8 per cent on the previous three month period.

Some analysts believe there is a chance that the slowdown across the economy could prompt a reaction from the Bank of England’s monetary policy committee (MPC).

“At the margin, the weakness of the data strengthens the hand of those on the MPC seeking to extend quantitative easing soon,” said Samuel Tombs at Capital Economics. “We doubt that it will be long before the committee reports to further stimulus.”

Meanwhile, German industrial output increased by four per cent in July, well above expectations of 0.5 per cent. That is a sizeable rebound from the one per cent fall experienced in June.

Economists say the future statistics may not remain this strong, however.

“Recent data show that demand has fallen, meaning production looks set to weaken in coming months as firms seek to reduce an unplanned build up of inventories,” said Chris Williamson at Markit.

“Producers are struggling in the face of weak foreign demand and a drop in business confidence in the home market.”

Production survey data also indicate a rise in unsold stock in Germany, which could lead to a fall in output next month.