Bloomberg News

U.K. Factory Output Falls 0.2% in November as Economy Weakens

January 12, 2012

Jan. 12 (Bloomberg) -- U.K. manufacturing production fell for a second month in November as the weakening economy curtailed demand for metals, wood and paper products.

Factory output fell 0.2 percent from the previous month, when it fell a revised 0.9 percent, the Office for National Statistics said today in London. The decline was in line with the median forecast of 22 economists in a Bloomberg News survey. Overall industrial output, which includes mines, utilities and oil and gas, fell 0.6 percent as warm weather hit energy demand.

Manufacturers’ prospects are worsening as the euro region edges toward a recession and an austerity drive at home erodes consumer confidence. The German economy contracted in the fourth quarter as the sovereign-debt crisis intensified and a slowdown is under way in China, undermining government hopes that exports and business investment will keep the U.K. economy growing.

“The overall impression is that manufacturers ended 2011 under serious pressure and face a difficult start to 2012,” said Howard Archer, chief European economist at IHS Global Insight in London. “Domestic demand for manufactured goods is being pressurized by the serious squeeze on consumers’ purchasing power and the euro zone crisis is causing major uncertainty for manufacturers and weighing down on confidence.”

Out of 13 manufacturing categories, seven fell on the month and six rose, the statistics office said. The decline was led by metals and metal products, wood and paper goods and chemicals. The fall in industrial production was led by mining and quarrying, while electricity and gas generation was hit by unusually warm weather.

Contraction

Factory output, which accounts for 10 percent of U.K. gross domestic product, fell 0.9 percent in the three months through November from the June-August period, the biggest decline since August 2009. Industrial production, equal to 15 percent of GDP, also fell 0.9 percent. In November, manufacturing fell 0.6 percent from a year earlier, the first annual decline since January 2010, and industrial production was down 3.1 percent.

“Manufacturing is on course for a fourth quarter contraction,” said Philip Shaw, an economist at Investec Securities in London. “Whether the economy as a whole avoided a contraction depends critically on the service sector. There is a real risk that the fourth quarter gross domestic product figures will post a decline.”

The British Chambers of Commerce said this week its measures of manufacturing export sales and orders fell to the lowest since 2009 in the fourth quarter. With banks planning to tighten lending terms, more stimulus from the Bank of England may not be enough to revive growth, the lobby group said.

The Bank of England will likely maintain the target for its asset purchases at 275 billion pounds ($426 billion) tomorrow as policy makers wait for new forecasts, a survey of economists shows.

Fenner Plc, the world’s largest conveyor-belt maker, acknowledged yesterday there is “uncertainty over the global economic outlook” and said sales growth rates will slow.

--With assistance from Harumi Ichikura in London. Editor: Andrew Atkinson

$UKIPIMOM <Equity> $UKMPIMOM <Equity> UKIPNEWS <Equity> UKMPNEWS <Equity>

To contact the reporters on this story: Svenja O’Donnell in London at sodonnell@bloomberg.net; Scott Hamilton in London at shamilton8@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net


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