Output figures show unexpected fall

The fragile nature of the UK’s economic recovery has been exposed by new figures that have revealed a drop in manufacturing output.

The Chartered Institute of Purchasing and Supply (CIPS) reported that its business activity index slipped to 49.5 in September, down from the 49.7 registered in August.

Any level below 50 indicates contraction, as any figure above 50 measures the rate of growth.

Analysts had been forecasting a move above the 50 mark.

However, the dip is a marginal one and manufacturing has staged a significant recovery from the lows of last year.

Nevertheless, David Noble, head of the CIPS, commented: “The latest data will disappoint those hoping for a quick economic recovery. We are now seeing the sector bump along through the recovery phase as some of the momentum inevitably wanes.”

Rob Dobson of Markit, which carried out the survey on behalf of CIPS, said: “The picture is one of consolidation, not contraction. New orders are rising, sterling is supporting export sales as overseas markets improve and the key orders-inventory ratio remains at an elevated level.”

But Mr Dobson did add that the future rate of recovery was still uncertain given the current reliance on price discounting and fiscal support.

There was somewhat more encouraging news from the International Monetary Fund (IMF).

The IMF has upgraded its prediction for the rate of UK economic growth in 2010 from 0.2 per cent, made in July, to 0.9 per cent.

The UK economy, the IMF said, was on course to shrink by 4.4 per cent in 2009, a little improved on the 4.6 per cent it originally forecast. Even so, a 4.4 per cent decline would make this year the worst in the UK’s history since the 1930s.