Manufacturing Woe!
15 / Mar / 2009
Last Tuesday’s Manufacturing output, which accounts for around 14 percent of the economy and excludes energy and utilities, fell by 2.9 percent in January against forecasts for a 1.4 percent decline. This brought an annual drop of 12.8 percent, also the steepest decline since January 1981. In the three months to January compared with the previous three months, factory output fell by 6.4 percent, its biggest drop since records began in 1968. But analysts said the much weaker than expected figures would have little impact on monetary policy as the Bank of England has already cut interest rates to a record low of 0.5 percent and is starting an aggressive programme of quantitative easing. The ONS said 12 out of 13 manufacturing sectors recorded declines in the three months to January, with especially significant falls in transport equipment, basic metals and metal products, machinery and equipment, and chemicals and man-made fibres. The only sector with increased output was coke, refined petrol and nuclear fuel, which expanded by 4.2 percent. Wednesdays report on the goods trade gap with the rest of the world widened more than expected in January, as a 16 percent fall in exports to countries outside the European Union outstripped a rise in exports to Europe. The UK goods trade gap widened to 7.745 billion pounds in January from 7.232 billion pounds in December, above analysts' forecasts for a deficit of 7.45 billion. The goods trade gap with non-EU countries also widened more than expected to a record 5.704 billion pounds from 4.340 billion in December. Analysts had forecast a deficit of 4.25 billion pounds. However, exports to EU countries rose nearly 6 percent, cutting the trade deficit with Britain's biggest trading partner to its narrowest since August 2003 at 2.041 billion pounds. The figures suggest the pound's weakness may be helping boost exports to European countries, but demand for British goods from further a field has fallen sharply as the global economic downturn gathers pace.
Data this week includes the minutes from the MPC committee vote on interest rates. This is widely expected to show a unanimous decision of 9 – 0 to cut base rate by 0.5%. Also on Wednesday are the ILO Jobless figures, which will no doubt continue the trend of bad news and finally on Thursday it’s the turn of the Public Sector Net Borrowing figures. Forecasters expect a major deterioration compared to a year ago with borrowing levels far exceeding the Governments borrowing forecasts for 2008/2009.