U.K. manufacturing shrank more than economists forecast in January

U.K. manufacturing shrank over economists forecast in January & posted the biggest quarterly drop in at least one decades as the recession throttled demand for British goods from cars to machinery.

Factory production dropped 2.9 percent from December, the Office for National Statistics said today in London. Economists predicted 1.4 percent, the median of 18 forecasts in a Bloomberg News survey shows. Manufacturing shrank 6.4 percent in the three months through January, the most since records began in 1968.

The global slump is ravaging British manufacturing, forcing ministers from Gordon Brown’s government to meet carmakers tomorrow to discuss a rescue plan. French industrial production plunged in January by the most in at least 19 years & italian exports fell for a fourth month, separate reports showed today.

“This is unbelievably grim,” Alan Clarke, a London-based economist at BNP Paribas SA, said in an interview. “There’s no sign of the slowdown abating. The Bank of England will probably require to do more.”

Car Slump

British manufacturing has now dropped for 11 months, the worst streak of contraction since 1980, when Margaret Thatcher was prime minister. Factory production accounts for about 15 percent of the economy, compared with about 75 percent for services & 6 percent for construction.

Production of motor vehicles & auto parts drove the slump in the transport category, the data showed.

Out of 13 categories of manufacturing, nine fell & one rose on the month, the statistics office said. Transport equipment, electrical, optical goods, & machinery & equipment led the declines.

French industrial production dropped 13.8 percent in January from a year earlier, the French statistics office said today, the biggest decline since the series began in 1990. italian exports declined 4.4 percent on the month.

Europe car production will probably fall 25 percent & sales are likely to drop 20 percent this year, the European car Manufacturers Association said on March 5.

U.K. Trade Minister Ian Pearson will set out how a 2.3 billion-pound ($3.2 billion) aid package for automakers will work & which companies will be eligible when they meets executives tomorrow. The government is considering separate help for General Motors Corp.’s Vauxhall unit.

“The pace of contraction remains  strong,” said Frederique Cerisier, an economist at BNP Paribas in Paris.

Global Workforce

IMI Plc, the world’s biggest maker of pneumatic controls, said last week it reduced its global workforce by 10 percent & plans further reductions in the coming weeks. Weir Group Plc, the world’s biggest maker of pumps for the mining industry, today said that sales at its oil-and-gas unit may drop as much as 30 percent this year compared with the second half of 2008.

Today’s report showed overall industrial production, which includes output of mining, utilities, oil & gas, dropped 2.6 percent in January. From a year earlier, it fell 11.4 percent.

The Bank of England cut its benchmark interest rate last week to 0.5 percent, the lowest ever, & pledged to raise the cash supply as it tries to shore up the economy. Gross domestic product fell 1.5 percent in the fourth quarter, the most since 1980, & officials say business surveys point to a similar pace of decline during the first three months of this year.

“Demand is gone across the board,” said Ross Walker, an economist at Royal Bank of Scotland Group Plc in London. “We could see manufacturing fall throughout the year. It’s difficult to see any significant turnaround.”

To contact the reporter on this story: Brian Swint in London at bswint@bloomberg.net.

Comments

Leave a comment

Name (required)

E-mail (required)

URI

Your Message