UK industry output falls

Manufacturing remains under pressure

Britain's hard-pressed manufacturers registered a further sharp drop in output in March.

The 0.2% fall was double the figure predicted by analysts and represented the sector's worst performance since October 2002.

Overall industrial output has fallen by 1% over the past year.

The figures will add to pressure on the Bank of England to cut interest rates.

Fears that such a move would fuel inflation have been eased by separate figures released on Monday showing a fall in wholesale prices.

Oil prices

The Office for National Statistics (ONS) said the price of goods leaving factories dropped 0.1% on the month in April, to stand 1.7% higher than a year earlier.

Manufacturing is still floundering with output below the levels when Labour came to power

Matthew Taylor
Liberal Democrats

Economists had expected a small rise on the month, but a drop in oil prices at the end of the Iraq war helped producer prices to fall.

The ONS also released data showing Britain suffered a £3.6bn goods trade deficit in March, similar to February's figure and in line with analysts' expectations.

The deficit, which is the result of UK imports being higher than exports, was £10.2bn for the first three months of 2003, slightly down on the previous quarter's £10.9bn.

The ONS added that export prices had risen by 1.5% to their highest level since March 1997.

The recent fall in the pound against the euro meant that exporters who price in euros were keeping their euro prices unchanged while receiving more in pounds.

Over-ambitious?

The output figures will fuel arguments that growth in the UK economy has been more sluggish in the first quarter of 2003 than previously thought.

They will also add weight to the view that Chancellor Gordon Brown's annual economic growth target is over-ambitious.

Commenting on the output data, John Butler, an economist at HSBC, said: "These numbers are undoubtedly bad, consistent with the gloomy surveys.

"Perhaps March's fall was exaggerated by the uncertainties associated with war."

Liberal Democrat treasury spokesman Matthew Taylor said: "Manufacturing is still floundering with output below the levels when Labour came to power.

"It is Gordon Brown's complacency on the economy, rather than his forecasts, that is threatening jobs, investment and growth."