A dismal start to the fourth quarter: UK manufacturing continues to struggle, says ITEM Club

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Nida Ali, economic advisor to the EY ITEM Club, comments on today’s industrial production and manufacturing output data:

  • A dismal start to the fourth quarter, but an accurate reflection of the manufacturing sector’s ongoing struggles
  • Given the recent business surveys it is likely to be well into next year before the sector enjoys any pick-up
  • Growth in Q4 is likely to stagnate at best, but a fall in GDP is looking increasingly likely
“A dismal start to the fourth quarter but, given the recent survey data, it wasn’t unexpected. October’s monthly decline in manufacturing output is an accurate reflection of the sector’s ongoing struggles. The combination of a build-up in stock levels and a very weak orders pipeline is forcing firms to cut back production levels.
 
“The business surveys tell us that the new orders pipeline has become progressively weaker over the past couple of months, and this is likely to continue in the months ahead. It could be well into next year, if not later, before UK manufacturers enjoy any sort of pick-up.
 
“This is another release in a long line of weak data that suggests a poor outturn for GDP growth in Q4. We expect the economy to stagnate at best, but a decline in GDP is looking increasingly likely. The Eurozone crisis is decimating confidence and dampening demand from abroad, and this is crucial for the UK economy. The longer the Eurozone debt crisis persists, the higher the possibility of the UK slipping back into a recession.”

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