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UK Manufacturing grinds to a halt

Manufacturing has been driving our economic recovery, such as it is, and was expected to continue to do so. But, there is bad news. Although manufacturing output grew by 0.9% in January, it failed to grow at all in February. Alan Clarke, UK economist at BNP Paribas, was quoted as saying that the data was “bitterly disappointing”.

The wider measure of total production actually fell by 1.2% between January and February, according to the Office for National Statistics, although there were claims that this was distorted due to maintenance work in the North Sea which pushed down oil and gas extraction.

Manufacturing has started to falter

Overall, industrial production accounts for 17% of UK GDP and these poor figures will impact the GDP figures, with first quarter data being released on 27th April. The Office for Budget Responsibility has forecast a GDP growth of 0.8% for the first quarter of 2011, although the National Institute of Economic and Social Research forecasts that it will be 0.7%.

Given that we saw the economy shrink by 0.5% in the last quarter of 2010, largely due to the snow, then we would expect the economy to play catch-up in the period from January to March. But this catch up, is not allowing for any real significant upturn in trend growth. With manufacturing flat, where is growth going to come from. Remember, the government is counting on the private sector to provide all the new jobs to compensate for the ones the public sector is busy destroying at the moment.

This is doubtless why the Monetary Policy Committee has continued to vote today to keep interest rates at their record low of 0.5%. The MPC feels that it just cannot take the chance of raising rates and thereby causing the economy to hit the buffers.

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Posted in economic growth, GDP, Manufacturing, Monetary Policy Committee, Office for Budget Responsibility, production, UK industry, unemployment

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