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Manufacturing is seeing its worst annual fall in output since the recession of the early 1980s – but there are also some tentative signs that the pace of decline in the sector, and in the economy more widely, is slowing.
In other words things are still getting worse, but just less rapidly than before: recovery – actual increases in output and employment—still seems far away to most observers. The Office for National Statistics said manufacturing output fell by 0.9 per cent in February, completing a year of successive monthly declines. However, while most economists expect falls in output to continue, they also feel they may be less steep: in January, manufacturing endured an alarming 3 per cent drop in output. The annual rate of decline now stands at 13.8 per cent. In the production industries more widely, including mining, activity is down 12.5 per cent on 2008.
The figures were better than the consensus in the City. Combined with other recent survey evidence from the Bank of England, the CBI and the Chartered Institute of Purchasing and Supply, it suggests the "inventory recession" phase of the downturn may be coming to an end, as de-stocking nears completion. Even so, economists remain pessimistic in their expectations for the growth figures for the first quarter of this year, which are out on 24 April. The National Institute of Economic and Social Research (NIESR) produces its estimates of economic output today – recording a contraction of 1.5 per cent, slightly lower than the official figure of 1.6 per cent in the last quarter of 2008. The NIESR cautions: "This does not indicate recessionary pressures are easing but is simply a very small difference accentuated by rounding."The output fall so far is very similar to that of the recession which began in the summer of 1979.
If the 1980s profile were followed, output would continue to decline for up to another year."Revised figures for the contraction of the eurozone GDP in the last three months of 2008 pushed it lower, to 1.6 per cent from 1.5 per cent. More encouraging news came from the Recruitment and Employment Confederation/KPMG Report on Jobs, which "signals an easing in the pace of labour market deterioration".Mike Stevens, a partner and the head of business services at KPMG, said: "Some observers might see small upticks in all these indicators as evidence of green shoots of recovery. The reality is that the UK jobs market is at its worst in the 11-year history of the survey and recovery might take longer and be more protracted than many hope.
"One key factor in the speed and viciousness of the downturn has been the destruction of consumer confidence, especially since the collapse of Lehman Brothers and ensuing financial panics last autumn.On this the Nationwide Consumer Confidence Index, also published yesterday, suggests "a little spring cheer". As with the other indicators, the pace of decline is again slowing down, with only a slight fall in sentiment between February and March. Consumers were only marginally more pessimistic about their own incomes and the chances of losing their job. Fionnula Earley, the chief economist at Nationwide, explained: "Overall, consumer confidence has remained broadly stable since the start of the year, but feelings about the current labour market have weakened. Spending sentiment has remained stable. This stability isn't surprising given further reductions on the high street and lower mortgage costs for some."
Provided by The Independent—from London, for Independent minds