By Marcus Leach
Official data released today (Tuesday) has revealed a surprise fall in UK manufacturing output in April.
The Office for National Statistics' data shows that factory output fell 0.7% in April from the month before, following a 0.9% rise in March.
However, the drop is not a surprise according to David Kern, Chief Economist at the British Chambers of Commerce (BCC).
“The fall in manufacturing output is not surprising given ongoing problems in the eurozone and the UK’s tough deficit-cutting programme," he said.
"It is important to avoid pessimism as many firms have shown resilience in the face of these obstacles, and have reserved their skills base during the recession. However, the immediate outlook is difficult. Our most recent forecast has indicated nil growth in manufacturing output this year and on the basis of this figure there is a risk that the sector will record a small decline in 2012."
Kern also believes that this data will lead to a renewed call for further quantitive easing, which will not be entirely helpful in his eyes.
“The new figures will also reinforce demands for the Monetary Policy Committee (MPC) to increase Quantitative Easing (QE)," he added.
"This would only be helpful if the Bank of England stops focusing asset purchases exclusively on gilts and starts purchasing other assets such as securitized SME loans. We are pleased that Adam Posen has this week publicly supported such a move. Other policies to support growth are also needed, particularly more forceful deregulation and an increase in infrastructure spending within the current spending envelope.”
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