Morning:
8°c
Factory production dropped at the start of the second quarter as the economic recovery stalled.
Official figures today showed manufacturing output fell 0.4% in April after a potent 2.2% rise in March.
The news met with disappointment in the City — but analysts remained hopeful that it will only be a temporary setback.
Howard Archer of IHS Global Insight said: “This does not mean that the manufacturing sector's recent fine run is coming to an end.
“Rather, it needs to be seen as a correction after a particularly strong jump in output in March.”
The wider measure of industrial production, which includes mining and oil and gas extraction, also fell 0.4% in April as the second quarter of the year got off to a sluggish start.
The economy expanded by 0.3% in the first quarter and 0.4% in the final three months of 2009 after a year-and-a-half of decline.
Gloomy forecasters are worried that looming spending cuts and tax rises, along with the continuing debt crisis in the eurozone, Britain's biggest trading partner, could tip the UK back into recession.
The Government is hoping manufacturers will lead the recovery as the weak pound boosts demand for British goods overseas.
Manufacturing output in February, March and April was 2.5% higher than it was in the previous three months — the strongest performance since October 1998.
Vicky Redwood, senior UK economist at Capital Economics, said: “Both manufacturing and industrial production unexpectedly fell in April, but given that they followed 2%-plus rises in March, we wouldn't worry too much. The industrial recovery still looks healthy.”
Despite the threat of rising inflation, the Bank of England yesterday left interest rates at 0.5% as it continues in its efforts to stimulate growth.
However, its own survey showed that the public now expects inflation will hit 3.3% over the next 12 months — up from 2.5% and well above the 2% target.
Figures also showed factory gate prices rose 0.3% in May, 5.7% higher than they were 12 months earlier.
