The contraction in UK manufacturing output in the three months to June was larger than previously estimated, according to revised GDP data out today. Manufacturing fell 0.5% in quarter-ago terms, compared to the previously estimated 0.3% drop. Also, the revision showed that manufacturing declined 0.1% in the first quarter, whereas the previous estimate was a rise of 0.1%. Disappointingly, the two consecutive quarters of contraction indicate that manufacturing slipped into a technical recession.
By sub-sector, the main downward revisions were to motor vehicles, and other transport. Revisions to these sub-sectors had an impact because, when combined, they account for around 13% of total UK manufacturing.
Despite the downward revisions, the main drag on manufacturing remained the supply chain effects from the decline in oil and gas investment. Low energy prices have discouraged investment in oil and gas production, which has in turn reduced the demand for mechanical equipment.
Our latest business trends survey indicates manufacturers remained under pressure in the third quarter but there were some positives. In particular, business investment edged down but hasn’t collapsed, and the indicators for employment and investment suggested continued – albeit weaker – growth.