New figures fuel triple-dip fears

ManufacturingA dire month for manufacturers after output slid by 1.5% during a snow-hit January has deepened the UK's triple-dip recession fears.

The latest gloomy figures from the Office for National Statistics (ONS) put further pressure on the pound, which declined to a new two-and-a-half-year low of 1.48 against the US dollar.
The UK economy contracted by a worse-than-expected 0.3% at the end of 2012 and will return to recession with another decline in the current quarter.

Samuel Tombs, UK economist at consultancy Capital Economics, said: "January's figures do little to ease fears that GDP may still be contracting and that the economy could therefore be in a triple-dip recession."

The manufacturing decline, which followed signs of improvement in December, meant overall industrial output dropped by 1.2% in January, dashing City hopes for a better performance over the month. Other factors behind the fall included the closure of the Schiehallion oil platform, which drove a 4.3% slide in oil and gas output.

While it is still possible that the services sector could rescue the UK economy in this quarter, the figures increase the pressure on the Bank of England to boost stimulus measures next month.

Most City experts believe there will be more quantitative easing this spring with interest rates at a record low for another two years.

Further signs that UK exporters are finding life tough emerged in separate figures on the UK's trade and goods deficit, which narrowed to £2.4 billion in January from £2.8 billion the previous month.

Total exports in goods decreased by £900 million or 3.5% to £24.4 billion, while lower consumption meant total imports fell by £1.4 billion or 4.2% to £32.6 billion.

Lee Hopley, chief economist at EEF, the manufacturers' organisation, said: "The main takeaway from the data so far this year is that much of manufacturing is facing an uphill challenge to grow in a difficult global demand environment."
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