The UK’s manufacturing output declined by 1.3% from September to October, the biggest drop since June, new figures showed today.
This decline was much larger than expected and increases the risk that GDP will fall in the fourth quarter of the year, according to David Kern, chief economist for the British Chambers of Commerce (BCC).
The Office for National Statistics (ONS) reported that the production of food, beverages and tobacco was down 2.4% from the prior month, particularly due to lower demand for beer, following the London Olympics and Paralympics which ended in September. Decreases were also registered in the pharmaceutical industry and in the manufacture of coke and refined petroleum.
Manufacturing output was down by 2.1% in October compared with the same month last year.
Lee Hopley, chief economist at EEF, the manufacturers’ organisation, said that today’s figures from the ONS confirm that life in manufacturing is getting much tougher, particularly for firms that export to the eurozone. She welcomed Chancellor George Osborne’s measures to support investment and exports in this week’s Autumn Statement and said that this must continue to be the case looking to next year’s Budget and Spending Review.
The UK economy emerged from nine months in recession in the third quarter, with the economy growing by 1% between July and September, but the drop in manufacturing output for October makes it more likely that GDP will decline again in the fourth quarter.
The BCC’s David Kern said that although we should not focus too much on one month’s figures, it is clear that the manufacturing sector is facing major obstacles to a sustainable recovery. He added, however, that the sector is well-managed, is still benefitting from a competitive exchange rate and has the potential to recover.