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UK manufacturing output in surprise fall UK manufacturing output in surprise fall
(about 4 hours later)
UK manufacturing unexpectedly fell in May, contracting at its fastest pace since January, official figures show.UK manufacturing unexpectedly fell in May, contracting at its fastest pace since January, official figures show.
The 0.8% drop was much weaker than analysts' forecasts, with most having predicted a rise. The wider measure of industrial output was unchanged.The 0.8% drop was much weaker than analysts' forecasts, with most having predicted a rise. The wider measure of industrial output was unchanged.
The figures run counter to data released recently that has indicated the economy picking up.The figures run counter to data released recently that has indicated the economy picking up.
Last week, a manufacturing sector survey recorded the best growth for nearly two years in June. As a result, the pound fell to a four-month low against the dollar, dropping 0.8% to $1.4832.
Other surveys pointed to continuing strength in the services sector, and a rise in confidence across UK businesses. A drop below that level would take it to a three-year low.
There was more good news for the UK housing market on Tuesday, with surveyors are expecting house prices to keep rising. Last week, the Halifax said that house prices were rising at their fastest annual rate for nearly three years. Growth hopes
The latest manufacturing numbers contrast with a survey of the sector published last week, which indicated it recorded its best growth for nearly two years in June.
Other surveys published last week pointed to continuing strength in the services sector, and a rise in confidence across UK businesses.
The National Institute of Economic and Social Research (NIESR) has estimated that the strong growth being seen in the services sector means the UK economy as a whole grew by 0.6% in the second quarter of the year. That compares with 0.3% growth in the first three months of the year.
NIESR says that while the recession may technically have ended, the period of depression, which it defines as a period when output is depressed below its previous peak, will continue for some time. The institute does not expect output to pass the peak recorded in early 2008 until 2015.
'Weak' momentum'Weak' momentum
Commenting on the latest Office for National Statistics (ONS) figures, Lee Hopley. of the EEF manufacturers' organisation, said: "Output gains in electrical equipment and transport sectors weren't enough to offset bigger contractions in pharmaceuticals and metals. Commenting on the latest Office for National Statistics (ONS) manufacturing figures, Lee Hopley. of the EEF manufacturers' organisation, said: "Output gains in electrical equipment and transport sectors weren't enough to offset bigger contractions in pharmaceuticals and metals.
"We did, however, see some growth in exports and signs of stabilisation in Europe providing a slight lift for overseas sales."We did, however, see some growth in exports and signs of stabilisation in Europe providing a slight lift for overseas sales.
"While the ONS data suggest industry's contribution to growth in the second quarter is likely to be limited, there are signs that confidence is returning and growth should start to resume as we move into the second half of the year.""While the ONS data suggest industry's contribution to growth in the second quarter is likely to be limited, there are signs that confidence is returning and growth should start to resume as we move into the second half of the year."
David Tinsley from BNP Paribas said: "Overall, this is not a strong set of data.David Tinsley from BNP Paribas said: "Overall, this is not a strong set of data.
"The momentum behind manufacturing remains disappointingly weak, which is troubling, given the economy needs to do more to rebalance towards sectors where it can hope to find demand for its exports.""The momentum behind manufacturing remains disappointingly weak, which is troubling, given the economy needs to do more to rebalance towards sectors where it can hope to find demand for its exports."
The ONS also said the UK's trade deficit grew to £8.491bn in May from £8.430bn in April. Separate figures showed that the trade deficit widened in May - also adding to economists' concern. The ONS said the UK deficit grew to £8.491bn in May from £8.430bn in April.
"The overall trade deficit is slightly up, but the April figure was revised down, which paints a mixed picture. Worryingly, the volume of exports in goods fell while imports increased," said David Kern, chief economist at the British Chambers of Commerce."The overall trade deficit is slightly up, but the April figure was revised down, which paints a mixed picture. Worryingly, the volume of exports in goods fell while imports increased," said David Kern, chief economist at the British Chambers of Commerce.
"Overall, our trade deficit is still too large, and we are not making fast enough progress in rebalancing our economy towards net exports," he added."Overall, our trade deficit is still too large, and we are not making fast enough progress in rebalancing our economy towards net exports," he added.