UK

Triple Dip Recession Fears Rise Again After ONS Reveals Manufacturing Output Dropped 1.5%

12/03/2013 11:26 GMT | Updated 12/03/2013 11:28 GMT

Sterling dropped to a new two-and-a-half year low on Tuesday of 1.48 against the US dollar after another dire month for manufacturing output, which slid by 1.5% during a snow-hit January.

Fears of a triple-dip recession rose again, after the latest gloomy figures from the Office for National Statistics (ONS) also showed the UK economy contracted by a worse-than-expected 0.3% at the end of 2012, meaning it will return to recession if we have another decline in the current quarter.

Samuel Tombs, UK economist at consultancy Capital Economics, said: "January's figures do little to ease fears that gross domestic product (GDP) may still be contracting and that the economy could therefore be in a triple-dip recession."

The manufacturing decline, which followed signs of improvement in December, meant overall industrial output dropped by 1.2% in January, dashing City hopes for a better performance over the month.

Other factors behind the fall included the closure of the Schiehallion oil platform, which drove a 4.3% slide in oil and gas output.

While it is still possible that the services sector could rescue the UK economy in this quarter, the figures increase the pressure on the Bank of England to boost stimulus measures next month, principally by starting the printing presses again.

Most City experts believe there will be more quantitative easing this spring with interest rates at a record low for another two years.

Further signs that UK exporters are finding life tough emerged in separate figures on the UK's trade and goods deficit, which narrowed to £2.4 billion in January from £2.8bn the previous month.

Total exports in goods decreased by £900 million or 3.5% to £24.4bn, while lower consumption meant total imports fell by £1.4bn or 4.2% to £32.6bn.

Lee Hopley, chief economist at EEF, the manufacturers' organisation, said: "The main takeaway from the data so far this year is that much of manufacturing is facing an uphill challenge to grow in a difficult global demand environment."