GDP rises while manufacturing output falls

Posted on 27 Oct 2015 by Fred Tongue

GDP has risen by 0.5%, but manufacturing output has fallen by 0.3%, according to the latest report from the Office for National Statistics (ONS).

The report says that the production industry – comprising of manufacturing, mining & quarrying, and energy supply – increased output by 0.3%, despite the fall in manufacturing output.

This is the third quarter in a row that has seen manufacturing output fall, with the first quarter of the year seeing a 0.1% decrease and the second quarter of the year seeing a 0.5% decrease.

Despite the problems that manufacturing is facing, GDP was 2.3% higher this quarter compared to the same quarter last year.

The main issue facing the manufacturing sector is a slow down in global demand, with less demand from China and emerging markets in particular causing significant challenges, as well as a strong pound making it difficult for exporters.

Following the release of the report, Chancellor George Osborne took to Twitter to say the UK should “live within our means.”

Commenting on the Q3 GDP data, EEF’s deputy chief economist, Zach Witton said: “Growth was partly dragged back due to manufacturing remaining in recession.

“The weakness was broad based across the sector as recent challenges have been exacerbated by the sharp contraction in iron and steel and, signs of slower demand from the consumer sector.

“Yet the news wasn’t wholly negative, with bright spots including transport equipment doing well thanks to a backlog of aircraft orders, and manufacturers still maintain some, albeit muted, confidence about their longer-term business prospects.

“The challenging environment highlights that policy decisions in the upcoming Spending Review, particularly on support for exporters and innovation, will be crucial for sustaining manufacturers’ confidence in the year ahead.”

CBI director of economics, Rain Newton-Smith commented : “These GDP figures show momentum continuing in the UK economy.

“Consumer spending, improving productivity and wages continue to bolster UK growth. But the weaker global outlook, combined with the strength of sterling will keep the pressure on UK manufacturers, as our recent surveys show.

“As we approach the Spending Review and Autumn Statement, it is vital that the Government protects areas of spending which will support the ratcheting up of UK productivity, helping to underpin sustainable public finances.”

Service industries were the strongest performers, according to the report, with a 0.7% increase in output.

Construction saw see the biggest decrease in output, with a drop of 2.2%, although that can has been partly attributed to the very wet August the country experienced.