UK manufacturing contracts first time in five months

UK factory production unexpectedly fell in January for the first time in five months, a sign manufacturing is struggling to shake off the recession.

Factory output dropped 0.9 per cent from December, the Office for National Statistics said today in London. Economists predicted a 0.2 per cent increase, according to the median of 26 forecasts in a Bloomberg News survey. Manufacturing expanded 0.2 per cent from a year earlier, the first gain in almost two years.

Prime Minister Gordon Brown, campaigning today for the election, said that the UK’s economic recovery is still “fragile” and in its early stages. Bank of England officials last week kept their bond-purchase plan at £200 billion ($299 billion) for a second month as they assessed the strength of the pickup from the longest recession on record.

“The headwinds for manufacturers are a lackluster pace of final demand growth and difficult financing conditions,” Philip Shaw, chief economist at Investec Securities in London, said in a telephone interview before the report. “The bank must still be nervous about downside risks to growth.”

Of the 13 categories in manufacturing, 11 fell, the statistics office said. The drop on the month was led by electrical and optical equipment, and chemicals and man-made fibers. Machinery and equipment, and food, drink and tobacco showed the only increases.

Policy maker Kate Barker said March 8 that the UK faces a “bumpy” recovery and manufacturers haven’t yet benefited from the drop in the pound. Sterling has fallen about 25 per cent in the last three years on a trade-weighted basis.

Laird Plc, the biggest maker of electromagnetic shields for mobile phones, said today that revenue fell last year to £528.8 million from 635.3 million in 2008.

“Trading conditions proved to be very challenging in 2009,” though “by the end of 2009 we had seen some recovery in a number of our markets,” Peter Hill, Laird’s chief executive officer, said in a statement. “The profile of an economic recovery remains uncertain.”

Overall industrial production, which includes utilities and mining and quarrying and accounts for 17 per cent of the economy, fell 0.4 per cent on the month. Economists predicted a 0.3 per cent gain, according to the median of 31 forecasts in a Bloomberg survey.