Pound falls on weak factory output

Written By Unknown on Selasa, 12 Maret 2013 | 19.12

12 March 2013 Last updated at 07:37 ET

The pound has fallen against the dollar and the euro after official figures showed UK manufacturing output fell by 1.5% in January from the month before.

The drop came after a 0.9% rise in output in December, and has added to fears of a third recession since 2008.

The pound hit a new two-and-a-half-year low of $1.4832 against the US dollar. The euro also rose to a two week high versus the pound of 87.77 pence.

Separate data showed the goods trade deficit shrank in January.

The Office for National Statistics said the goods trade deficit was £8.195bn in January from £8.738bn in December. The goods trade deficit with non-EU countries also narrowed to £3.280bn from £4.169bn the month before.

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Both the trade deficit figures were at their lowest since July. However, while the trade gap is shrinking the figures show that total exports in goods decreased by £900m, or 3.5%, to £24.4bn, as total imports fell by £1.4bn or 4.2% to £32.6bn.

And, although it welcomed the improved deficit figures, the British Chambers of Commerce said more could be done to boost overseas trade.

However, while the gap is shrinking the figures show that total exports in goods decreased by £900m, or 3.5%, to £24.4bn, as total imports fell by £1.4bn or 4.2% to £32.6bn.

"More effective action is needed to ensure that the considerable untapped potential of many British exporters can be used to drive a sustainable recovery.." said the BCC's chief economist, David Kern.

"The government must implement the measures it has already announced to support companies seeking to break into new markets.

"We clearly need a national export strategy that focuses on key areas such as trade finance, promotion, and insurance, and would enable British companies to compete in the global arena."

'Difficult outlook'

The manufacturing output figures were weaker than expected, and come the week before Chancellor George Osborne announces his latest Budget. Mr Osborne has come under pressure to introduce stimulus measures in the Budget to try to revive growth.

The economy contracted in late 2012, and the UK will be back in recession if economic activity shrinks this quarter.

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The chancellor will give his fourth Budget speech on 20 March at 12:30 GMT

There is full coverage of the Budget and how it affects you on the BBC News website

You will also be able to watch the event on a special programme on BBC Two and the BBC News Channel from 11:30 GMT

Last month, ratings agency Moody's cut the UK's AAA credit rating, which hit the pound, and the value of sterling has continued to edge down since then.

The wider reading of industrial output, which takes into account energy production and mining, fell 1.2% after a 1.1% rise in December, partly due to a shutdown of a North Sea oil field.

The mining and quarrying sector saw a drop of 2.4% in output.

Analysts said the new data could be seen as a pointer for the wider economy.

"After a positive end to last year, January's figures show that the outlook remains difficult with uncertainty set for the medium-term," said Mike Rigby, head of manufacturing at Barclays.

"Manufacturing has long been seen as a precursor for the UK economy, and therefore it's no surprise that current activity mirrors the challenging economic environment.

And Alan Clarke, economist at Scotiabank, said: "This [manufacturing data] is the penultimate nail in the coffin in terms of triple-dip - it's pretty much game over now.

"Unless we have a stellar performance from the services sector, we're almost certainly in a triple dip."


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