Manufacturing sector raises UK recession fears
Manufacturers’ expectations for output fell at the fastest pace in 36 years in October, underlining fears that the UK economy is on the verge of another recession.
By Angela Monaghan
6:00PM BST 26 Oct 2011
A gloomy “industrial trends” survey from the CBI showed the eurozone crisis is weighing down on sentiment and manufacturers expect output to fall over the next three months, with the balance falling 20 points to -11pc from +9pc in September.
Michael Saunders, economist at Citigroup, said it was the biggest one-month decline since this part of the survey began in 1975, and others said the survey signalled a contraction in the economy overall in the fourth quarter.
“The CBI survey fuels concern that the UK economy is in serious danger of contracting in the fourth quarter. It is blatantly evident that manufacturers are being hit hard by domestic and international headwinds,” said Howard Archer, chief UK economist IHS Global Insight.
General business sentiment in the manufacturing sector has slumped to recession levels, according to the CBI survey, falling on a quarterly basis to -30pc in October from -16pc in July, the weakest level since April 2009 when the economy was still contracting.
“Sentiment has deteriorated sharply, and firms expect sizeable falls in activity over the next three months,” said Ian McCafferty, the CBI’s chief economic adviser.
“Confidence among manufacturers is no doubt also being sapped by uncertainty over developments in the eurozone, leading to broader concerns over global growth.”
The index for export optimism also fell sharply to the lowest level since April 2009. “This is particularly worrying given that, with weak domestic demand, prospects for UK growth are heavily dependent on exports,” Mr Saunders said. The CBI data suggested that employment and investment in the manufacturing sector are both likely to be cut in the coming months.
Manufacturers expected to find it increasingly difficult to access finance over the coming three months.