UK manufacturing fall adds to market turmoil

• Shock 0.4% decline in factory production in June • Car production suffers 1.7% fall • FTSE down 3.6% on news and debt crises • UK trade gap rises to £8.87bn Fears over the UK economy intensified on Tuesday, sending the London stock market slumping, after British factory production posted a surprise fall in June and the UK trade gap worsened. The unexpectedly poor data from the industrial sector added to the glut of disappointing news on the UK economy, at a time when markets are already in turmoil due to debt crises in the eurozone and the US. The FTSE 100 index in London fell 5.5% after the data was released, and was trading 180 points lower at 4888 at 10am, down 3.6%. Manufacturing output fell by 0.4% in June from the previous month, confounding the City’s expectation of a 0.2% increase, and following a rise of 1.8% in May, according to the Office for National Statistics. Car production suffered the biggest fall, of 1.7%, while chemicals, and paper and publishing also shrank in June. ING economist James Knightley said: “The worry is that plunging equity markets will hurt business confidence and lead to firms cutting orders thus prompting further falls in output. As a result, the prospect of further action from the Bank of England continues to grow.” Industrial production, which also includes utilities and mining, was flat on the month after North Sea oil and gas extraction failed to bounce back from maintenance work in May. This means that industrial output was down 1.6% between April and June, worse than the ONS’s previous estimate of a 1.4% decline. The fall was the biggest quarterly decline since May 2009, but the ONS said its negative impact on GDP would be limited to less than 0.05 percentage points. Manufacturing makes up just 13% of Britain’s economy. Trade figures, also released by the ONS on Tuesday, showed Britain’s deficit in goods trade with the rest of the world widened to £8.87bn from £8.47bn – the biggest gap since December 2010. “With surveys of export orders having fallen in recent months, it still does not look like net trade will provide a big enough boost in the months ahead to get the recovery going again,” said Vicky Redwood, senior UK economist at Capital Economics. Manufacturing data Economics Economic growth (GDP) Financial crisis Stock markets Julia Kollewe guardian.co.uk

Posted by on August 9, 2011. Filed under News, Politics, World News. You can follow any responses to this entry through the RSS 2.0. You can skip to the end and leave a response. Pinging is currently not allowed.