UK manufacturing output tumbled 1.1% in August – a much steeper fall than the City had feared – according to official figures that cast further doubt over the country's ability to mount a meaningful economic recovery.
Meanwhile, separate official figures published yesterday showed the UK racked up its second-biggest monthly trade deficit on record in August, of £4.17 billion.
The grim manufacturing and trade figures were published as the International Monetary Fund forecast that UK gross domestic product (GDP) would fall by 0.4% this year. It had, as recently as July, predicted 0.2% growth in the UK in 2012.
The IMF cut its projection of UK growth in 2013 from 1.4% to 1.1%.
The 1.1%, seasonally adjusted fall in UK manufacturing output between July and August, unveiled by the Office for National Statistics, was nearly twice as steep as the 0.6% drop projected by the City. It left manufacturing output in August down 1.2% on the same month of last year.
And, comparing the three months to August with the March to May period, UK manufacturing output was down 0.7%. Broader industrial production, which includes mining and quarrying, oil and gas extraction, and electricity, gas and water supply as well as manufacturing output, fell by 0.5% month-on-month in August to be down 1.2% on a year earlier.
The ONS, meanwhile, revealed the UK's deficit on trade in goods with the rest of the world had leapt from £7.34bn in July to £9.84bn in August.
This cast further doubt on Chancellor George Osborne's vision, offered in his March 2011 Budget, of "a Britain carried aloft by the march of the makers".
Goods exports tumbled from £25.7bn in July to £24.6bn in August, while imports of goods rose from £33bn to £34.5bn.
The surplus on trade in services improved marginally, from £5.63bn in July to £5.68bn in August
However, the overall trade deficit widened from £1.7bn in July to £4.17bn in August because of the deterioration in the goods balance. The £4.17bn August deficit has been exceeded only by that for April 2012.
Samuel Tombs, UK economist at consultancy Capital Economics, said: "August's weak industrial production and trade figures indicated the underlying trend in GDP is flat at best, and therefore undermined hopes that the 'green shoots' of economic recovery are emerging."
He noted the recent volatility of economic statistics, given the extra bank holiday for the Queen's Diamond Jubilee in June.
The ONS cited anecdotal evidence that a greater proportion of manufacturers than usual closed for the summer holidays in August.
Mr Tombs observed this "apparently particularly affected transport manufacturers" – with a fall in output at these factories accounting for about one-third of the drop in overall UK manufacturing output.
However, he declared the underlying trend in manufacturing output "seems to be slightly down", and added: "Indeed, both industrial production and exports were lower in August than in May – the last monthly figure that was unaffected by the Jubilee distortions.
"And the weakness of the latest manufacturing surveys suggests that this downward trend is set to persist."
A survey from the Chartered Institute of Purchasing and Supply (CIPS) signalled UK manufacturing activity fell further in September. CIPS also reported a sharp slowing of service sector growth last month.
Mr Tombs said: "Although GDP should see a technical bounce-back from the bank holiday in Q3, [the] figures suggested that the underlying picture is still very weak."
Chris Williamson, chief economist at financial information company and CIPS survey compiler Markit, said: "A batch of dismal data and a gloomier assessment of the economic outlook has cast a further dark cloud over the UK's economic health, piling pressure on the Government to review its fiscal policy and growth strategy.
"The economy may still pull out of its recession in the third quarter, but a return to contraction in the fourth quarter cannot be ruled out, as the underlying growth momentum clearly remains extremely weak."
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