Page last updated at 10:16 GMT, Tuesday, 12 May 2009 11:16 UK

UK manufacturing continues fall

Drugs being manufactured
The pharmaceutical industry is one of the more successful parts of the sector

UK manufacturing output continued to decline in March, but the falls were not as severe as had been expected.

It fell 5.5% in the quarter, compared with the previous three months, the Office for National Statistics (ONS) said, which was the worst since 1948.

But March output was down 0.1% month on month, its smallest fall in 13 months.

The ONS also announced that the UK's trade deficit narrowed to £2.5bn in March from £2.8bn in February, which was also better than had been expected.

"The trade deficit is much better than expected for a second consecutive month," said Alan Clarke, an economist at BNP Paribas.

It is too early say that the downturn in manufacturing is over
Stephen Radley, chief economist, EEF

"We've already seen the impact of the weaker pound on inflation, now we are starting to see the benefit in terms of a narrower trade deficit."

The narrowing deficit was a result of imports falling faster than exports, as the weak UK economy reduced demand.

'Positive data'

Industrial production, a wider measure which includes energy supply, mining and oil and gas as well as manufacturing, fell 0.6% in March compared with February, making an annual fall of 12.4%, which was the biggest since records began in 1968.

But that was still taken as good news by analysts.

Stephanie Flanders
Things may even improve quite quickly over the rest of this year. What we don't know is what happens next
Stephanie Flanders
BBC economics editor

"The industrial production figures are significantly better than expected and the February fall was revised sharply upwards," said Philip Shaw, chief economist at Investec.

"All in all, fairly positive data for the UK economy this morning."

But the manufacturers' organisation EEF said the situation was still bad in many areas.

"It is too early say that the downturn in manufacturing is over," said EEF chief economist Stephen Radley.

"While the overall figures show output declining more slowly, the rate of contraction is still severe in some industries and trade volumes are still weak."

The British Chambers of Commerce (BCC) said the manufacturing downturn was a threat to the skills in the country.

"Although many firms are viable and productive, they face considerable risks to their skills base," said BCC chief economist David Kern.

"Unless the government takes further specific action to help manufacturers maintain these precious skilled jobs, the sector and the wider UK economy will suffer."

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