UK on triple-dip recession alert as Honda cuts 800 jobs at Swindon and data shows manufacturing output fell in November
Two pieces of gloomy news on Friday summed up the parlous state of British manufacturing.
The first was the news that Honda is to cut 800 jobs at its Swindon plantdue to weak demand from Europe. Given that the auto sector has been one of the few bright spots for industry, this was particularly depressing.
The second snippet came from the Office for National Statistics, which said manufacturing output contracted by 0.3% in November and was 2% lower than a year earlier. With the fourth-quarter growth figures due out in two week's time, the City was on full triple-dip recession alert.
A word of caution is needed here. Manufacturing now accounts for around 10% of gross domestic product, with the broader measure of industrial production – which includes North Sea oil and gas and domestic energy production – making up around 18% of national output.
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| News that Honda is cutting 800 jobs is particularly depressing given the car industry had been a bright spot for UK industry. |
Construction – where there were also downbeat figures for November – makes up a further 7%. That leaves the service sector, where there is so far only data for October, making up the other three quarters of the economy.
Even so, from the data available, the signs are not that promising.
Industrial production in October and November was 2.3% lower than the average for the third quarter so unless there is a marked – and, it has to be said – unlikely spurt in December, there will be a chunky quarter-on-quarter drop in the final three months of 2012. Industrial production, which in the latest quarter was at its weakest level since 1991, could shave half a percentage point off growth.
The picture from construction is better. Although there was a drop in output in November, that followed a sharp rise in October. Output was 1.8% higher in the three months to November than in the three months to August, so it would take a drop of around 10% in December construction output to prevent the sector from providing a positive contribution to growth.
Evidence from the service sector is mixed as well as scanty. Consumer spending in October and November was nothing to write home about, although there seems to have been a last minute flurry both in the high street and online in the days just before Christmas.
Data for December will, however, be unavailable to the ONS when it makes its first stab at calculating the fourth-quarter growth figures on January 25. As things stand, the figure looks like being close to zero, with the odds slightly on a negative number.
This would not, strictly speaking, constitute a triple-dip recession – two successive quarters of falling output would be required for that – but it would certainly have David Cameron and George Osborne on tenterhooks about the GDP data for the first three months of 2013, a quarter which in the past has been at the mercy of the weather.
Article Source : http://www.guardian.co.uk
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