Monthly manufacturing output falls unexpectedly

Manufacturing was the largest contributor to the annual overall growth in production output of 2.3% in the year to May 2014, increasing by 3.7%. The main manufacturing components contributing to this increase were rubber, plastic and other non-metallic mineral products; transport equipment; and food products, beverages and tobacco. However, total production decreased by 0.7% between April 2014 and May 2014 with manufacturing being the largest contributor, decreasing by 1.3%. The main contributors to the decrease in manufacturing were basic metals and metal products; basic pharmaceutical products and pharmaceutical preparations; and computer, electronic and optical products. In the three months to May 2014, production and manufacturing were 11.3 and 7.2% respectively below their figures reached in the pre-downturn GDP peak in Q1 2008. David Kern, chief economist at the British Chambers of Commerce, said: "Despite the progress made over the past year, manufacturing output is still more than 7% below pre recession levels - in contrast to services which are more than 2% higher. The annual figures still show healthy growth, consistent with our Quarterly Economic Survey published this morning, which shows that although the recovery is continuing, the pace has slowed. "Manufacturing exporters must now cope with a much stronger pound, making their products more expensive for overseas customers. Exporters have so far shown resilience however, the situation could become serious if sterling strengthens much further. This reinforces the arguments for the MPC to delay increases in interest rates until it becomes absolutely necessary. The recovery must be given time to consolidate and gather more momentum. "The risks to the economy of premature increases in rates are much greater than the risks of waiting a little longer."