Output blow to UK manufacturing

Optimism had been increasing

The UK's struggling manufacturing sector has suffered a set-back with an unexpected fall in output in March, official figures show.

This is a major shock given recent survey evidence had suggested manufacturing was rising out of recession

Phillip Shaw, Investec economist

Analysts had expected to see a rise of 0.3% in manufacturing output in the last month, but Office for National Statistics (ONS) data showed it shrank by 0.8%.

Industrial output, which includes oil, gas and utilities, was down 0.4%.

The figures will come as a blow to the manufacturing sector which had been buoyed by predictions of a rise in output, and Tuesday's Confederation of British Industry review which showed confidence rising.

'Major shock'

It will also increase the pressure on the Bank of England's interest rate-setting committee, which begins a two-day meeting on Wednesday, to leave interest rates at their present low of 4%.

Within manufacturing, there was a sharp monthly fall of 2.9% in the chemicals and man-made fibres industry, and 1.9% in the transport equipment industries.

The falls in chemicals and transport accounted for 70 percent of the monthly decline in manufacturing output, ONS said.

Philip Shaw, economist at Investec bank, said: "This is a major shock given recent survey evidence had suggested manufacturing was rising out of recession.

Uncertainty

"Now we are left with considerable uncertainty about whether it really is recovering and about the pace of the recovery in the economy as a whole."

The fall comes a month after manufacturing output rose for the first time since August with a month-on-month increase of 0.2% during February.

Including the current downturn, the output figure for the three-month period to the end of March is now 1.5% lower than the previous quarter.

It is also 6.5% lower than a year earlier.