Manufacturing slump shows economy is more imbalanced than ever

Britain’s post-referendum recovery in manufacturing came to an abrupt halt in October. Two months of rising output were followed by a chunky 0.9% drop in October.

To put it mildly, this came as a shock to economic forecasters. Strong consumer demand, the fall in the value of sterling and, especially, strong survey evidence, had all pointed to rising factory production.

It didn’t happen. The weak performance of manufacturing was compounded by North Sea output falling as a result of routine maintenance. It meant that industrial production, which includes the offshore and onshore energy sectors and mining and quarrying as well as the output from factories, was down by 1.3% between September and October.

That represented the biggest one-month decline since September 2012, a period when the eurozone was going through a particularly acute crisis.

The Office for National Statistics always warns against reading too much into the data for a single month and it seems highly probable that North Sea oil production will have bounced back in November.

Even so, the figures are worrying in two respects. Firstly, they mean that it will take a very strong performance in November and December to prevent a second successive quarterly fall in industrial production. Even a 1% increase in both months would result in a 0.1% decline in the fourth quarter. That would leave the sector, which accounts for 15% of economic output, in a technical recession.



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