Welcome boost for UK manufacturers

Welcome boost for UK manufacturers

UK factory output bounced back strongly in January, marking the sector's first rise in activity for four months.

Official figures showed manufacturing output lifted by a better-than-expected 0.7% on the month in January, following a 0.3% dip in December.

The data from the Office for National Statistics (ONS) showed t he biggest boost came from manufacturing and repair work.

Activity in the wider industrial production sector rose by 0.3% month-on-month in January after a 1.1% fall the previous month. But economists had expected a 0.5% month-on-month rise.

The ONS report added that in the three months to January, production and manufacturing were up by 10.2% and 6.4% respectively, but below the peaks they hit before the downturn in 2008.

Last week a report from the monthly MarkitCIPS survey of British manufacturers said factory output is teetering on the brink of stagnation after expanding at its slowest pace for nearly three years last month.

The UK has been one of the fastest-growing advanced economies in the world for the last couple of years, but this growth is based around retail spending, and economists have long argued for greater manufacturing expansion to better balance the economy.

Manufacturing output makes up around 12% of the UK economy, whereas the powerhouse services sector accounts for around three-quarters of UK gross domestic product.

British Chambers of Commerce chief economist David Kern said that while the better-than-expected manufacturing data in January was welcome, wider evidence "suggests that the sector is still struggling, and on an annual basis and output remains in negative territory".

Kern added: "The UK economy will have to continue to rely on its dynamic and flexible services sector for the next few years, which will continue to be the main driver of growth."

But last week's monthly MarkitCIPS survey of the UK services sector saw its weakest growth for almost three years in February, indicating that UK growth may slow down in the first quarter of the year to 0.4% or 0.3%, from 0.5% in the fourth quarter of 2015.

Howard Archer, chief European and UK economist at IHS Global Insight, said he expected British economic growth to come in at no more than 0.4% in the first three months of this year "given recent largely disappointing economic news and the likelihood that activity will be constrained by mounting uncertainties ahead of June's referendum on EU membership".