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UK Economy
UK manufacturers hit by eurozone woes
From the Financial Times of Tue, 09 Dec 2014 10:49:40 GMT

Britain’s manufacturers have suffered a drop in output as they grapple with economic malaise in their big export markets in the eurozone

Official data show total industrial production fell 0.1 per cent between September and October, driven by an unexpected 0.7 per cent drop in manufacturing output.

Output fell in eight of the 14 manufacturing subsectors, but the biggest drag was from computers and electrical products. The EEF trade association said the electronics sector’s large exposure to the German market had “taken its toll on production”.

Manufacturing output was still 1.7 per cent higher than a year ago. But the recent deterioration suggests UK manufacturers are having an increasingly hard time, even though the dominant services sector remains buoyant.

“Expectations of when UK interest rates may start rising will most likely be pushed back with the news that the manufacturing economy is struggling once again, and that the economic upturn remains all too dependent on domestic spending,” said Chris Williamson, an economist at Markit.

Others were less concerned. Paul Hollingsworth, an economist at Capital Economics, said the plunge in oil prices since the summer from about $110 to $66 a barrel should “provide a timely fillip to growth”.

“Granted, UK manufacturers have been compelled to pass on any cost savings to consumers recently, so they are unlikely to be able to rebuild their margins. But lower prices should still help to boost demand for their products,” he said.

Most economists expect the pace of economic growth to ease from 3 per cent this year to about 2.5 per cent next year, partly because of faltering growth in the eurozone, the UK’s biggest trading partner.

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