Manufacturing output fell by 1.5% in January, a fall described as “awful” by economists that has the City's cognescenti talking about the likelihood of a triple dip recession.
George Osborne’s growth aspirations were dealt a bitter blow yesterday as manufacturing output fell by 1.5% during the snow-effected January, which outstripped City forecasts.
The “awful” output figures, as one economist put it, pushed the pound to slide to £1.48 against the dollar, the lowest exchange rate in two and a half years. Ross Walker, Royal Bank o Scotland’s chief economist said “The central case now is we are heading for a triple dip.”
The Chancellor seems to have little room to manouever in the Budget in two weeks, as latest economic figures show that despite his policies the budget deficit is rising, parts of the economy are contracting and inflation is rising. The ominous pattern caused the Financial Times this morning to run a story on “the spectre of stagflation”, where inflation rises at the same time as economic recession.
The Government is now hoping for a rally in the services sector, which publishes it January data later this month. Without “stellar performance” from this sector, said one economist, the UK is almost certainly facing a triple dip.
Despite the concerning data, many pockets of manufacturing are doing well. Jonathan Wilkinson, managing director of award-winning mechanical seals manufacturer AESSEAL in Rotherham yesterday told the manufacturer that the company is realistically aiming for £150m turnover this year, on revenues of £134m in 2011/2012.
Engine maker Rolls-Royce recorded record profits and turnover in February, Jaguar Land Rover is doubling the size of its new engine plant in Wolverhampton.
There is also building evidence that more companies are ‘reshoring’ production from overseas, such as food manufacturer Symington’s who announced that 50 new jobs will be created in Yorkshire when the company transfers its noodle production from China to the UK.
Such evidence does not detract from moribund output data in a very disappointing month for UK manufacturing, but shows there are plenty of bright spots as the sector continues to adapt to flat demand from Europe.