Tentative signs of recovery in industrial sector

There were further tentative signs of recovery in the battered industrial sector today as official figures revealed the smallest annual decline in production since the financial crisis struck.

Industrial production rose by 0.4 per cent between October and November, with the year-on-year decline easing to 6 per cent - the best result since September 2008, according to the Office for National Statistics (ONS).

A fall of 5.4 per cent in the manufacturing sub-sector for November was also the best result in more than a year.

However, manufacturers saw the second month of flat output in a row, raising concerns among economists of a weak recovery.

Most experts forecast manufacturing output at 0.2 per cent to 0.3 per cent in November, while recent survey results also implied a stronger pick-up in the sector.

Jonathan Loynes, at Capital Economics, said: "November's industrial production figures confirmed that the recovery in the manufacturing sector remains fragile."

He added: "While output in the sector has at least stopped falling, it remains very close to its trough and a huge 14 per cent below its early 2008 peak."

Britain's manufacturing industry has been hammered amid the recession, seeing year-on-year declines reach more than 14 per cent last February.

Machinery and equipment firms continue to act as the biggest drag on the sector, while transport equipment makers have made a recent recovery, with output rising by 3.5 per cent between October and November, said the ONS.

The wider industrial production sector, which includes utility firms and mining groups, was buoyed by a 7.2 per cent month-on-month hike in oil and gas production in November, with mining and quarrying output up 5.9 per cent.

While manufacturing progress continues to disappoint, Mr Loynes said the overall industrial sector should have added around 0.2 per cent to gross domestic product in the fourth quarter of 2009, helping pull the UK out of recession.

Benjamin Williamson, at the Centre for Economics and Business Research, added: "Today's news supports the view that the economy returned to growth in the fourth quarter of 2009.

"Our own forecast is for economic growth of around 0.7 per cent over the last three months of the year compared with the previous quarter."

But he predicted sluggish growth in 2010, with the manufacturing sector not in line for a significant boost until 2011, when sterling weakness will help drive exports.