UK industrial sector slips back into recession after weak manufacturing rally
UK industrial output growth returned to growth in March, according to the Office for National Statistics, but at a slower rate than economists had predicted after a weak start to the year.
Industrial production rose 0.3% on the previous month, up from the 0.2% decline in February but short of the 0.5% consensus estimate.
UK manufacturing output also rallied but by less than hoped, with a month-on-month increase of 0.10% an improvement on the 0.9% revised figure from the month before but short of the 0.3% the market was expecting and the ONS’s initial estimate of 0.4%.
A 1.9% annual decline in manufacturing production was the biggest annual fall in output in almost three years, led by a 4% drop in the manufacture of basic metals and metal products, particularly iron and steel, after shutdowns within the industry.
The EEF manufacturers' trade body pointed out that it was a mixed picture across different sectors.
Chief economist Lee Hopley said more evidence was coming through that the sectors hardest hit by the oil price collapse are now bottoming out while construction related sectors seem to be holding up.
“But, in line with the early warning signal from the PMI and the drop in consumer confidence, consumer facing sectors, including motor vehicles, are seeing weaker production trends at the start of the year," she said. "Whether this proves to be temporary is yet to be seen but UK manufacturers are far from alone in seeing this trend with other data from Europe suggesting that the industrial recovery is far from secure.”
The data was disappointing, said Ruth Miller of Capital Economics, as it merely confirmed growth remained "precariously unbalanced".
"The overall industrial production sector subtracted about 0.05 percentage points from GDP growth in Q1 and slipped back into recession for the first time since mid-2012."
Looking ahead, while further weakening in manufacturing PMI data suggested that the manufacturing sector started the second quarter on a poor footing, she still expects things to look up as the year progresses.
"Sterling’s recent depreciation and our expectations that global growth will pick up slightly in 2016 should allow the sector to return to modest growth later this year."