Hope dashed for a speedy UK recovery
FRESH fears about UK economic recovery emerged yesterday after manufacturing unexpectedly stagnated and experts forecast a long haul out of the slump.
Manufacturing output showed zero growth for a second month running in November and the improvement in the annual decline was worse than expected, slowing to 5.4 per cent from 7.8 per cent, the Office for National Statistics (ONS) said. The data coincided with a report from the Engineering Employers Federation (EEF) and business advisers BDO predicting only a “muted” manufacturing recovery in 2010 before a pick-up in 2011.
EEF chief economist Lee Hopley said: “The outlook for the UK economy this year is far from certain, with little momentum behind a recovery until the latter part of the year.”
Most experts forecast manufacturing output at 0.2 per cent to 0.3 per cent in November, while recent survey results also implied a stronger pick-up.
The figures are likely to support hopes that Britain’s economy emerged from its deepest recession for more than 50 years at the end of 2009, though weak manufacturing raises concerns about the sustainability of any revival.
Jonathan Loynes at Capital Economics said: “The recovery in the manufacturing sector remains fragile.”
On an upbeat note, ONS said higher oil and gas extraction helped industrial output to rise at a slightly faster than expected 0.4 per cent in November after a 0.1 per cent decline in October. Analysts had expected a rise of 0.3 per cent.
The manufacturing data is likely to increase the Bank of England’s concerns when it considers whether to expand its £200billion quantitative easing (QE), or money-printing policy, next month.
Policy maker Andrew Sentance said the bank was close to the point where it could decide to freeze the QE programme.
“At some point you have to say we have increased the amount of stimulus enough,” he said.
Meanwhile, the National Institute of Economic and Social Research forecast 0.3 per cent growth in GDP in the three months to the end of December and 0.2 per cent in the three months to November.
The NIESR said GDP fell 4.8 per cent in 2009, the UK’s biggest drop since 1921.