UK manufacturing output in Surprise drop in May

Jul 11, 2014

Britain's economic recovery accelerated in the second quarter despite a surprise fall in manufacturing output in May, according to a respected thinktank.

The National Institute of Economic and Social Research (NIESR) said the unexpected drop in production would weigh "only marginally" on the wider economy, estimating a 0.9% rise in GDP between April and June, an improvement on the first quarter's 0.8% growth.

Simon Kirby of NIESR said: "We have to remember the manufacturing sector accounts for only 10% of the overall economy. In addition we expect the manufacturing sector to rebound in June, offsetting much of the drop in output in May."

The first official estimate of the second quarter will be published by the Office for National Statistics (ONS) on 25 July.

Economists were left baffled by the apparent slowdown in Britain's factories in May, when manufacturing output fell by 1.3%, defying City expectations of a 0.4% rise. It was the biggest drop in 16 months and marked the end of a five-month run of expansion – the longest since 2010.

The ONS said the decline was broad-based. Metals, pharmaceuticals, and electronics saw the biggest falls, which offset a rise in clothing manufacturing.

Economists suggested a "Goldilocks" period – where the UK economy is neither too hot nor too cold – could be coming to an end. Martin Beck of the EY Item Club said: "Weaker demand from overseas, as well as the headwinds presented by the strength of sterling … are likely to have contributed to the poor performance of the sector."

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