Economy stumbles at start of second quarter as manufacturing contracts

Output in Britain's manufacturing sector suffered its sharpest decline since 2012 in April, painting a worrying picture for the country's growth prospects at the start of the second quarter.

Official data from the Office for National Statistics showed that manufacturing output fell by 1.4% month on month, the steepest decline since October 2012.

The figure was well below economists' expectations of 0.3% growth.

Lacklustre manufacturing data helped drag down overall industrial output, which fell 0.8% in April, also below forecasts.

Head of national accounts at the ONS Rob Kent-Smith said: "Manufacturing fell in the three months to April with electrical machinery and steel for infrastructure projects seeing reduced production.

"International demand continued to slow and the domestic market remained subdued."

Construction bounced back slightly in April following three consecutive months of contraction, nudging up 0.5% month on month.

But on a three-month basis to April, construction output fell by 3.4%, the biggest fall since August 2012.

"While construction output saw a small bounce-back in April after a poor start to the year, over the longer term this sector continues to contract with significant falls across most types of work.

"Construction orders fell for a second successive quarter after recent boosts from large rail projects. However, new housing orders reached their highest level since before the economic downturn," Mr Kent-Smith added.

Sterling took a knock following the data dump, falling 0.3% to 1.33 against the dollar and 0.4% versus the euro to 1.13 euro.

Bank of England rate setter Dave Ramsden signalled last week that the economy's sluggish start to 2018 - first quarter growth came in at just 0.1% - would make way for better growth figures as the year goes on.

But the latest data set has left economists unconvinced.

Howard Archer, chief economic adviser to the EY ITEM Club, said: "A miserable and thoroughly worrying set of UK data that fan concerns over the UK economy.

"While March's poor performance had clearly been influenced markedly by the severe weather, there are few mitigating factors for a slump in UK manufacturing output in April, a tepid rise in construction output and a sharply widened trade deficit as exports nosedived

"We have been expecting UK GDP growth to improve to 0.4% quarter-on-quarter in the second quarter, but the April industrial production, construction output and trade data make this look hugely optimistic."

Separate figures showed that the UK's trade deficit in April was the biggest in over one-and-a-half years.

The trade in goods deficit widened to £14 billion from £9.24 billion a year ago and £12 billion in March. The latest figure was the biggest since September 2016, when the deficit was £14.25 billion.

Economists had forecast a shortfall of £11.4 billion.