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EDITIONS
Friday, 23 August, 2002, 12:48 GMT 13:48 UK
Manufacturing slump hits UK growth
Electronics production line in factory
Manufacturing output slumped in June
The disruption to manufacturing output caused by the Jubilee holiday has led to previous estimates of the UK's economic growth being cut back.

The economy grew by 0.6% during the April to June period, compared with an initial calculation of 0.9%, the Office for National Statistics (ONS) said.

UK GDP growth
quarter-to-quarter
2002 Q2: +0.6%
2002 Q1: +0.1%
2001 Q4: +0.1%
2001 Q3: +0.3%
2001 Q2: +0.6%
2001 Q1: +0.5%
2000 Q4: +0.4%

Source: ONS
The ONS blamed the downward revision on the weak performance by the manufacturing sector during June.

Factors such as the Jubilee holiday and the World Cup led manufacturing production to fall by 5.3% in June compared with the previous month, the biggest monthly drop for 23 years.

"There is evidence that factories were shut down for longer than expected around the Jubilee holiday," the ONS said.

Manufacturing output fell by 0.7% over the three month period.

The revision meant that the UK economy has grown by 1.2% since the same period last year.

"It is broadly as people have thought and had seen it coming with manufacturing and retail sales data," said Andrew Smith, chief economist at KPMG.

Where next for rates?

The downwards revision was widely expected, and analysts are now wondered whether the change will lead the Bank of England to cut interest rates.

"There is no need for panic measures, but if global or domestic circumstances worsen, a rate cut should be seriously considered," said Sarah Low, acting head of policy at the British Chambers of Commerce.

The Banks rate-setting committee discussed a possible rate cut at its last meeting.

It noted that inflation was low, and that the global economic recovery remained fragile.

"Consumption is still the driver of the economy and if that starts to wane, there would be few reasons to keep interest rates on hold," said David Page, an economist at Investec.

"We are now pencilling a quarter-point rate cut in the fourth quarter."

On Thursday, the latest set of retail sales figures hinted that the retail boom could finally be coming to an end.

The data showed that spending in the UK's shops had grown at its slowest rate for 18 months.

Will the UK economy feel the impact of the US slowdown?

Economic indicators

Analysis

UK rate decisions
See also:

22 Aug 02 | Business
22 Aug 02 | Business
01 Aug 02 | Business
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