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Economic recovery suffers double blow
HOPES for economic recovery have been dented by a double dose of disappointing economic figures.
Output from British factories fell unexpectedly in August, sending overall industrial production down 1.1 per cent in its biggest monthly fall for nearly a year, according to the Office for National Statistics (ONS).
Official trade figures also dealt a blow as the deficit remained stubbornly high at £3.3bn in August, down only marginally on the £3.4bn recorded in July.
Experts said the data came as a reality check on the UK economy after recent excitement over recovery prospects has seen some economists forecasting growth of more than 1 per cent between July and September - the best quarterly economic performance for six years.
Samuel Tombs, UK economist at consultancy Capital Economics, said the figures may dampen hopes that the recovery picked up much more pace in the third quarter as well as undermine hopes that the economy is finally rebalancing.
He added that while industrial production is still likely to contribute to overall growth in the third quarter after a decent performance in June and July, the trade deficit could act as a significant drag.
A 1.2 per cent fall in manufacturing output was behind the disappointing industrial sector performance, which came against expectations for a 0.3 per cent rise.
There were big falls in output from food manufacturing, pharmaceuticals and electronic goods.
But the sector is expected to have rebounded in the autumn, with the underlying trend remaining robust as the ONS said industrial output was 1.1 per cent up in the three months to August against the previous three months.
Manufacturers organisation EEF said the August disappointment was a setback.
EEF chief economist Lee Hopley said: Manufacturing should make a positive contribution to third-quarter gross domestic product growth and other business surveys seem to align behind a continuation of this trend through the final months of the year.
The British Chambers of Commerce (BCC) raised concerns that the trade figures revealed inadequate progress on rebalancing the economy.
The deficit is already bigger in the first two months of the third quarter than the whole of the second quarter.
But there were signs of improvements, as exports to countries outside the European Union rose by £0.7bn to £12.3bn in August, which helped offset a £0.4bn drop in EU trade to £12.8bn.
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