UK's return to recession in the balance

Tuesday 09 April 2013 17.41
UK factory output up 0.8% in February
UK factory output up 0.8% in February

The UK's hopes of avoiding a return to recession remained in the balance today following mixed figures on manufacturing and exports.

Economists were cheered by a month-on-month improvement of 0.8% in factory output for February, reversing some of the 1.9% slide in January.

But separate figures from the Office for National Statistics also showed a widening in the UK's trade deficit, largely due to a 1.1% fall in exports amid weaker demand from the beleaguered euro zone.

The UK will duck its third recession since the start of the financial crisis if GDP figures on April 25 avoid a second quarter in a row of contraction. 

Many economists think growth for the first quarter of 2013 will be marginal, having declined by 0.3% in the previous three months.

Markit chief economist Chris Williamson said there were signs of improving business and consumer confidence.

"Economic growth should therefore accelerate in the second quarter, although the ongoing crisis in the euro zone will inevitably continue to dampen export growth and limit the overall pace of expansion,'' he added.

The UK's deficit on trade in goods and services was estimated to have been £3.6 billion sterling in February, the biggest figure since last August and worse than the result of £2.5 billion seen in January.

There was a shortfall of £9.4 billion on goods, partly offset by an estimated surplus of £5.8 billion on services.

As well as continued pressure in the euro zone, there was a 4.7% fall in exports of goods to non-EU countries, including a £329m fall in exports to the US.

Overall industrial production rose by 1% on the previous month, but this did not offset all of January's 1.3% fall.

Much of the improvement reflected temporary factors, with electricity and gas production up by 1.3% in response to February's colder than usual weather. And mining and quarrying output rose by 2.8%.