UK manufacturing output down 1.5% in January

The chances of the UK avoiding another recession are looking slimmer today, with official figures showing a drop manufacturing output for January.

After the announcement by the Office for National Statistics (ONS) this morning the pound fell against the dollar and the euro.

On a seasonally adjusted basis, UK manufacturing fell by 1.5% between December 2012 and January 2013. This was weaker than expected and has fuelled fears that the economy may contract in the first quarter, officially entering its third recession in five years.

Driven by reduced oil and gas extraction, output for mining & quarrying was down 2.4% from December and there was also a drop of 0.2% in the waste management sector. These falls were partially offset by a 1.2% increase in the energy supply sector. Overall, industrial production was 1.2% lower than in the prior month.

Compared against the same month last year, industrial production in January 2013 declined by 2.9% and the narrower measure of manufacturing output was down 3.0%.

A separate report released today by the ONS showed that the UK’s deficit in trade in goods shrank in January, although this was because imports fell more than exports.

The goods trade deficit narrowed to GBP8.2bn, from GBP8.7bn in December. Total exports of goods from UK manufacturers decreased by GBP900m or 3.5%, to GBP24.4bn, while total imports fell by GBP1.4bn or 4.2% to GBP32.6bn.

As in previous months, the dominant services sector helped to offset the goods trade deficit. According to the ONS the UK had an estimated surplus of GBP5.8bn on trade in services in January.

Including the trade in goods and services the overall deficit was an estimated GBP2.4bn in January, compared with a deficit of GBP2.8bn in December.

David Kern, chief economist of the British Chambers of Commerce (BCC), said that more effective action is needed to ensure that the untapped potential of many British exporters can be used to drive a sustainable recovery.