No rebalancing as industry fails to drive growth
THE ECONOMIC recovery was being driven entirely by services, official figures showed yesterday, as factories failed to keep pace.
Manufacturing output grew by just 0.2 per cent in the second quarter, the Office for National Statistics (ONS) said.
And the wider industrial production measure, which included sectors such as mining, grew by 0.3 per cent.
Such a poor growth rate was just half the 0.6 per cent economists had expected, and represented the weakest quarter since late 2012.
By contrast, overall growth – led by the services sector – came in at 0.8 per cent in the quarter.
Some sectors expanded strongly – production of transport equipment jumped by 3.1 per cent in the three-month period.
But several others fell. Textiles and leather knocked 0.2 percentage points off the growth figure, as did mining and quarrying.
“The industrial production figures confirmed that the onus was even more on the services sector to keep the recovery chugging along in the second quarter,” said economist Paul Hollingsworth of Capital Economics.
“However, we doubt that the latest figures signal the end of the manufacturing revival.
“July’s manufacturing PMI remains consistent on the basis of past form with quarterly growth in the official measure of manufacturing output of around one per cent at the beginning of the third quarter.”
It came as the National Institute of Economic and Social Research (NIESR) estimated GDP growth had slowed to 0.6 per cent in the three months to July, down from 0.8 per cent in the three months to June.
But the analysts believe the economy can pick up more steam over the coming months.
“While the economy regained its pre-recession size recently, a significant negative output gap remains,” NIESR said.
“We expect the Monetary Policy Committee to introduce the first interest rate hike in February 2015.