UK manufacturing output fell by 1.5% in January indicating that the UK is heading for a ‘triple-dip recession’.
Yesterday’s announcement led to an immediate fall of the pound to $1.4832.
The Index of Production from the Office for National Statistics (ONS) showed that manufacturing fell by a massive 3.0% compared with January 2012.
The pound also fell sharply against the euro, with official figures showing the euro rose to a two week high against the pound of 87.77 pence.
Separate data showed the goods trade deficit shrank in January, with the ONS announcing that total exports in goods decreased by £900m, or 3.5%, to £24.4bn, while imports fell even faster, by £1.4bn or 4.2%, to £32.6bn.
The ONS said that the manufacturing output figures were ‘weaker than expected’, which is bad news for Chancellor Osborne who announces his budget next Wednesday.
Industrial output, which takes into account energy production and mining, fell 1.2% after a 1.1% rise in December, partly due to a shutdown of a North Sea oil field, while the mining and quarrying sector saw a drop of 2.4% in output.
Analysts said the new data can be seen as a pointer for the wider economy. ‘January’s figures show that the outlook remains difficult with uncertainty set for the medium-term,’ said Mike Rigby, head of manufacturing at Barclays.’
Alan Clarke, economist at Scotiabank, was more graphic, saying: ‘This (manufacturing data) is the penultimate nail in the coffin in terms of triple-dip – it’s pretty much game over now. Unless we have a stellar performance from the services sector, we’re almost certainly in a triple-dip.’
Unite assistant general secretary Tony Burke said: ‘These figures should serve as a warning to George Osborne that his forthcoming budget must be a game-changer for Britain’s economy.
‘The country faces the very real threat of a triple-dip recession unless there is urgent action to boost the economy. The ONS figures also show that it would be foolish for the chancellor to bank on the service sector to rescue the economy.
‘Unfortunately, George Osborne’s promise of a march of the makers was a work of fiction by a poor author. As part of the budget, Britain needs a strategic manufacturing plan, but the government seems a long way off from developing one.
‘At present, the government’s “cross your fingers and hope for the best” strategy is predictably failing.
‘Britain needs a massive boost and a strategic plan to power the country out of the doldrums.’
Dave Wiltshire, the Secretary of the All Trades Unions Alliance, commented: ‘What we need now is the trade unions to act for the entire suffering country by calling a general strike to bring down the coalition and bring in a workers government and socialism.’
• Chancellor Osborne has announced the next Spending Review, which is expected to outline further cuts, will take place on 26 June.