Weak factory output builds recession risk

 
Tim Wallace
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INDUSTRIAL and manufacturing output fell in the UK in October, data from the Office for National Statistics (ONS) revealed yesterday, leading economists to warn that some sectors are falling back into recession.

The index of manufacturing fell 0.7 per cent between September and October, bringing annual output growth down to just 0.3 per cent.

The declines represents the largest monthly fall since April, when output fell 1.3 per cent, largely as a result of the extra royal wedding bank holiday.

Production industries – encompassing sectors like energy, water and mining, as well as manufacturing – shrank by 0.7 per cent on the month and 1.7 per cent over the 12-month period.

Furthermore, figures for previous months’ output have been revised down slightly,

“UK manufacturing is probably now slipping back into recession,” said Michael Saunders, economics analyst at Citi.

“These readings set the stage for a negative quarter in the last three months of this year, and it would not be surprising if the overall economy also saw negative growth either in this or the next quarter.”

In the Eurozone, Italy’s industrial output also continued to slide, declining 0.9 per cent in October following September’s 4.6 per cent drop.

Germany too experienced weak growth, with a 0.8 per cent rebound failing to fully counter the two previous months of declining output.

The figures come after purchasing managers’ indices pointed to a weak output picture going into 2012, and demand appears sluggish.

“This data did little to alter the likelihood that the Eurozone has fallen back into recession in the fourth quarter,” said Capital Economics’ Jennifer McKeown.

“We see GDP falling by a much weaker than consensus one per cent in 2012.”