By Maximilian Clarke

The UK’s manufacturing output contracted 0.3% over July, the latest statistics reveal, brought down by economic uncertainty and reduced consumer spending power contributing to muted demand in the UK and overseas.

Though the fall further evidences the challenges facing the UK economy, output remains 1.5% higher than for the same period last year. Further, the government has this morning (Tuesday) announced a £170 million investment to stimulate industrial output as part of its growth strategy, a factor likely to facilitate future growth.

Commenting on the manufacturing output David Kern, Chief Economist at the British Chambers of Commerce (BCC), says the figures are not surprising given the challenges facing the broader global economy.

“In view of the worsening global economic background, the manufacturing output figures, while disappointing and weaker than expected, are not surprising," he said.

"Growth has slowed during the last month, but longer-term comparisons show manufacturing output has increased, both on a three-monthly and annual basis.

“The figures broadly reinforce the picture painted by the BCC’s Quarterly Economic Survey, and support our view that growth has remained in positive territory in the third quarter of the year. There is no need for undue pessimism about the health of the manufacturing sector, but there are challenges ahead, particularly for those firms exporting to the Eurozone.

“The recent move to increase the QE programme is helpful, but not sufficient. The government must urgently implement its plans for credit easing, with a particular focus on small- and medium-sized businesses. The government for its part must be more proactive in pursuing growth-enhancing policies, and look to reallocate priorities within the overall spending envelope.”

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