Biggest fall in manufacturing output for two years, says ONS

The ONS reorts that manufacturing output fell sharply in April

Manufacturing output increases by 1.8 per cent in May

The Office for National Statistics (ONS) has released new data that shows manufacturing output increased by 1.8 per cent in May, rebounding after a fall in April.
Will the Bank of England raise interest rates?

The Bank of England’s Monetary Policy Committee (MPC) meet tomorrow to decide on whether to raise interest rates amid conflicting economic reports issued this week.

Friday, June 10, 2011 11:44 AM

Manufacturing output fell sharply in April with output dropping at its fastest pace for over two years, according to the latest survey from the Office for National Statistics (ONS).

Experts had expected to see a very small change on March figures where output grew by 0.2 per cent month-on-month. However, manufacturing output fell by 1.5 per cent in the month, raising fears that the UK economic recovery is weakening. Industrial output overall which includes electricity production fell by 1.7 per cent in the month. This was partly influenced by the warm weather in April.

The figures are disappointing because the manufacturing sector provided one of the few bright spots in the UK economy in 2010 and the first quarter of 2011. Part of the decline in April was down to the extra bank holiday due to the Royal wedding and the effects of industrial inactivity in Japan.

Output in this crucial sector of the economy has only grown by 1.3 per cent in the last year.

Howard Archer, of IHS Global Insight said: “Industrial production dropped by a far greater-than-expected 1.7% month-on-month in April, thereby raising concerns over growth in the second quarter. This was undoubtedly heavily influenced by production being lost to the extra day's public holiday resulting from the Royal Wedding.”

UK carmakers were particularly badly affected in the month with vehicle production down by 7.6 per cent on March.

Mr Archer said: “it is evident that events in Japan are causing problems for some manufacturing sectors through causing supply chain disruptions.”

There was some moderately good news on Factory gate price inflation. This increased by 5.3 per cent in April, down from 5.5 per cent in March and backs up the Bank of England’s view that the rate of inflation for manufactured goods is falling.

With regard to the manufacturing figures affect on the bank’s interest rate policy, Mr Archer said: “A much sharper than expected fall in industrial production in April and an easing back in producer price inflation in May reinforces belief that the Bank of England will hold off from raising interest rates until November and suggests that it is becoming ever more likely that the bank won't move until 2012 as growth concerns prevail over inflation risks.”

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