Manufacturing output falls 1.3%

UK manufacturing output fell by 1.3% in May 2014, the biggest drop since January 2013, according to official figures.

The Office for National Statistics (ONS) said the decline in output was caused by falling production of coke and refined petroleum (-8.4%), electrical equipment (-7%) and pharmaceutical products (-5.9%).

The fall in manufacturing output contributed to a 0.7% fall in total production between April and May 2014.

Despite the fall in monthly figures, yearly output remained positive:

  • total production output grew 2.3% between May 2013 and May 2014
  • the biggest contributor was manufacturing, with output increasing 3.7% in the same period
  • yearly manufacturing output was driven by rubber, plastics, transport equipment, and foods, drinks and tobacco.

Neil Prothero, deputy chief economist at EEF, said that the manufacturer's organisation, remains confident that growth will continue for a fifth consecutive quarter:

"This brings to an end a very strong run of data and serves as a reminder that manufacturers continue to face a number of headwinds, not least subdued external demand across Europe, which continues to weigh on export prospects. Monthly production data can be volatile and the dip in May contrasts with other positive surveys and healthy domestic order expectations.

"Anecdotal evidence from across the sector continues to point to solid momentum over the second half of the year."

David Kern, chief economist at the British Chambers of Commerce, said the figures strengthen the case for interest rates to remain low:

"Manufacturing exporters must now cope with a much stronger pound, making their products more expensive for overseas customers. Exporters have so far shown resilience however, the situation could become serious if sterling strengthens much further.

"This reinforces the arguments for the Monetary Policy Committee to delay increases in interest rates until it becomes absolutely necessary. The recovery must be given time to consolidate and gather more momentum. The risks to the economy of premature increases in rates are much greater than the risks of waiting a little longer."