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UK manufacturing shows surprise fall in April

By Michael Millar

Date: Tuesday 12 Jun 2012

UK manufacturing shows surprise fall in April

UK manufacturing registered a surprise fall in April, raising the prospect of a longer period of recession for the country.

The news will also put pressure on the Bank of England to increase its £325bn asset purchase scheme, known as quantitative easing.

The Office for National Statistics said manufacturing production fell 0.7% in April compared to the month before, whereas analysts had pencilled in no change.

Compared to April last year it contracted by 0.3%, confounding predictions of a 0.4% rise.

"The drop in manufacturing output is a blow to the economy’s chances of avoiding further contraction in the second quarter – especially as it is being handicapped by the extra day’s public holiday resulting from the Queen’s Diamond Jubilee celebrations," said Dr Howard Archer, Chief UK Economist at IHS.

Industrial production, a wider measure of output from all of the UK's factories and mines, flatlined compared to the month before.

A 13.6% monthly rebound in electricity and gas output spurred by the bad weather only just managed to offset the fall in manufacturing output and a 5.7% drop in mining and quarrying output.

"Admittedly, if manufacturers’ customers have been destocking and postponing expenditure as a result of the greater economic uncertainty, some of the drop in manufacturing output might be short-lived," said Samuel Tombs, UK Economist at Capital Economics.

"But given that the euro-zone crisis has intensified since April and recent manufacturing surveys have been very weak, it seems likely that the industrial sector will remain a drag on overall GDP growth for some time to come," he added.

The poor figures follow a raft of bad economic news for the UK, including the recent downwards revision of first quarter GDP to -0.3%.

Figures from the CBI's latest monthly industrial trends survey showed British factory orders deteriorated faster than expected in May.

Meanwhile Markit's Purchasing Managers Index showed that Britain's manufacturing sector shrank at its fastest pace in three years in May.



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