Car makers drive industrial output, exports fall

Surging car production helped the UK’s manufacturing sector expand slightly in October, but the nation’s trade deficit remained stubbornly high as exports fell for the second month in a row.

Car manufacturing was a beacon of good news. Picture: Getty

The Office for National Statistics (ONS) said manufacturing output grew by 0.4 per cent compared with September, boosted by a 2 per cent increase from transport equipment.

The figures, which show motor production was 16.8 per cent ahead of last year, came just days after the Society of Motor Manufacturers & Traders said annual new car registrations were on track to reach about 2.25 million, making 2013 the best year for sales since the pre-recession peak of 2.4 million six years ago.

Economists have expressed concern that the UK’s recovery has been too reliant on consumer spending while manufacturing and exports have struggled, but Howard Archer of IHS Global Insight said the latest data “bodes well for fourth-quarter GDP growth”.

However, the ONS said the trade deficit remained steady at £2.6 billion, while the balance of goods trade was £9.7bn in the red. Although this was down from £10.1bn the previous month, it fell short of economists’ forecasts of £9.2bn, and the total trade deficit with the EU widened to a record £6.5bn.

Barclays economist Blerina Uruci said the weakness in EU trade was to be expected given the problems in the eurozone, but “the weakness in exports to non-EU countries raises concerns about the competitiveness of exporters”.

However, she said the recent strengthening of sterling was helping to bring down the cost of imported goods, reinforcing hopes that inflation will fall gradually towards the Bank of England’s 2 per cent target next year.