Spanner in the works for manufacturers as output falls 0.7%

Manufacturers are bearing the brunt of the consumer spending squeeze. But they're not the only ones.

by Emma Haslett
Last Updated: 06 Nov 2012
The past few months has been a rollercoaster ride of emotions for manufacturers: back in August, two separate surveys showed confidence was in the doldrums, then in September, things started to look up. Now, though, the sector’s back on a downward trajectory, with official figures indicating that manufacturing output fell by 0.7% in October – not only its biggest monthly fall since April, but three times the drop forecasters had expected. Although the UK’s manufacturing brethren can at least take comfort in the fact that they’re not the only ones feeling the pinch…

According to the figures, from the Office of National Statistics, output In the UK’s industrial sector as a whole also fell by 0.7% in October, down 1.7% on the same period last year and its steepest drop for six months. Other than manufacturing, one of the worst casualties of the fall was energy production, which dropped by 5.4% - which the ONS put down to this October being the warmest since 2006. So retailers aren’t the only ones to be affected by the mild weather.

What’s worrying is that the manufacturing sector is seen as a bellwether of wider economic activity – thus, analysts have suggested that this data suggests the beginning of a very unpleasant period not just in the sector, but across the rest of the UK. ‘It’s a grim start to the fourth quarter,’ said Philip Shaw, an economist at Investec. ‘It tends to bear out our view that the UK is going to double dip and will re-enter recession. These figures seem to suggest it could be sooner rather than later.’

Grim indeed – but at least we’re not the only ones going through it. China has also warned that its exporters are facing ‘severe challenges’ because of the debt crisis in Europe. Apparently, figures released on Saturday will show exports to the EU and the US fell 9% and 5% respectively in October – which, considering the two regions make up 40% of China’s total exports, isn’t good. Although there is some evidence that rather than lose out, the country’s exporters are simply transferring their attentions elsewhere: apparently, its total exports were still up almost 16%, thanks to rising demand in Latin America. Still: it’s the weakest growth China’s exporters have experienced in two years. Which suggests the debt crisis has spread much further than its eurozone beginnings.

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