By Claire West

Poor manufacturing output figures suggest that UK economy may be relapsing into recession.

The seasonally adjusted index of production fell by 3 per cent in October 2012 compared with October 2011. This is the 19th consecutive monthly fall on the same month a year ago.

Between September 2012 and October 2012 this index fell by 0.8 per cent. The main downwards contributions were in the mining & quarrying sector where there was a fall of 3.9 per cent and, a fall in the manufacturing sector of 1.3 per cent.

These falls were partially offset by an increase in the energy supply sector, which rose by 4.5 per cent, and an increase of 1.1 per cent in the water & waste management sector.

Commenting on the figures, David Kern, Chief Economist at the British Chambers of Commerce said:

"The decline in manufacturing was much larger than expected. The wider industrial production figures were also bleak, with a decline of 0.8% instead of the increase that was anticipated. The new data increases the risk that GDP will record a decline in the fourth quarter of the year. In our recent forecast, we predicted that manufacturing output would see a decline of 1.1% in 2012 as a whole. However unless there is significant rebound in the final two months of the year, the fall could be even larger.

“Although we should not focus too much on one month’s figures, it is clear that the manufacturing sector is facing major obstacles to a sustainable recovery. However there is no justification for pessimism. Manufacturing is still a significant sector of our economy and is still benefitting from a competitive exchange rate, not withstanding sterling’s rise over the past year. Weak growth in world trade will limit the scope for significant rises in manufacturing exports, but the sector is well-managed, and has the potential to recover. Crucially, many manufacturing firms have been able to maintain their skill bases during the recession.

“Clearly manufacturers have to adjust to a difficult reality of weaker growth prospects, but British businesses have the will and the ability to make progress if given the right support. While continuing to reduce the deficit, the government must provide firms with the confidence to invest and grow to ensure that our economic recovery is sustainable over the long term.”

Manufacturing

The seasonally adjusted index of manufacturing fell by 2.1 per cent in October 2012 when compared with October 2011.

Nine manufacturing sub sectors fell and four rose. For this period the largest downward contributions in manufacturing output were: the manufacture of chemicals & chemical
products, which fell by 9.4 per cent; the manufacture of wood and paper products, which fell 9.3 per cent and, the manufacture of rubber & plastic products which fell by 9.2 per cent. In contrast, the largest increase came from the manufacture of transport equipment, which rose by 6.0 per cent.

Seasonally adjusted manufacturing output fell by 1.3 per cent in October 2012 compared with September 2012, following no change in growth between August and September 2012.

Ten manufacturing sub sectors fell, two rose and one remained the same. The largest contributions to the month on month fall were: the manufacture of food products, beverages & tobacco, which fell by 2.4 per cent (largely due to the alcohol manufacturing industries); the manufacture of
pharmaceutical products, which fell by 5.1 per cent and the manufacture of coke & refined petroleum, which fell by 19.6 per cent