Economic growth hopes after factory output upturn

Official statistics yesterday showed that factory output had risen by 0.8 per cent in February. Picture: Getty
Official statistics yesterday showed that factory output had risen by 0.8 per cent in February. Picture: Getty
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HOPES that Britain can duck its third recession in less than five years were boosted yesterday with news of a surprise rebound in factory output.

Economists also pointed to signs of improving business and consumer confidence but said growth for the first quarter of 2013 was likely to be marginal at best.

The economy shrank by 0.3 per cent in the final three months of last year and would enter recession if that was followed by a second consecutive quarter of contraction. An initial reading of Q1 gross domestic product is due to be published on 25 April.

Official statistics yesterday showed that factory output had risen by 0.8 per cent in February, reversing some of January’s 1.9 per cent slide. The wider reading of industrial output, which includes energy production and mining, rose 1 per cent after a 1.3 per cent drop in January.

David Tinsley, UK economist at BNP Paribas, said: “With services output also currently looking positive for Q1 (though here the data is patchy), it looks as though the economy can register some weak positive overall growth in the first quarter, thus avoiding the triple-dip recession label.”

But he added: “The construction data is always a wild card however, with the February release out this Friday.”

Industrial output was partially lifted in February by the biggest rise in the production of electricity and gas since October, amid freezing weather conditions.

Despite the robust figures, many analysts believe that the prospect of a fresh recession hangs in the balance.

A recent survey of hundreds of purchasing managers that showed a contraction in manufacturing activity in March has fuelled that uncertainty.

Separate figures from the Office for National Statistics yesterday showed a widening in the UK’s trade deficit, largely due to a 1.1 per cent fall in exports amid weaker demand from the beleaguered eurozone.

Jim Bligh, the CBI’s head of exports policy, said: “This month’s trade figures reveal a disappointing fall in exports to non-European Union countries and a worrying downward trend overall. These figures underscore the need for businesses to explore new high growth markets.”

Scott Corfe, senior economist at think-tank the Centre for Economics and Business Research, said an export-led recovery was proving elusive.

“Despite the collapse in the value of sterling since the financial crisis and all the political rhetoric on the need for the country to ‘make things again’, goods exports still haven’t become sufficiently internationally competitive for such a rebalancing of the economy to take place.

“Weakness in our largest export market – the eurozone – has also hit demand for exports.”

The UK’s deficit on trade in goods and services was estimated to have been £3.6 billion in February, the biggest figure since last August and worse than the result of £2.5bn seen in January. There was a shortfall of £9.4bn on goods, partly offset by an estimated surplus of £5.8bn on services.