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Factory output ended year by growing at slowest pace for three months

UK factory output ended the year by growing at its slowest pace for three months, a report said today.

manufacturing (PA) (2)

The closely-watched CIPS/Markit purchasing managers’ index (PMI) survey posted a reading of 51.9 in December – where 50 separates growth from contraction.

This is down from 52.5 in November, and the sector’s 16-month peak of 55.5 in October. Economists had expected growth in December to come in at 52.8.

Manufacturing production over 2015 was lower than the previous year, the survey added.

However, the report pointed out that factory output rose for the 33rd month in a row, underpinned by higher domestic orders and exports to such countries as continental Europe, the US and China.

The consumer goods sector remained the prime driver of production and new order growth, despite seeing its rates of expansion ease over the month.

It added that manufacturing costs continued to fall at a sharp pace during December, due to declines in oil and other commodity prices.

Rob Dobson, senior economist at Markit, said: “The UK manufacturing sector ended 2015 on a disappointing note, with its rate of growth slowing further from October’s recent high back down towards the stagnation mark.

“This suggests that industry will make, at best, only a marginal positive contribution to broader economic growth in the final quarter of the year.”

This data comes after shock revisions to growth in the third and second quarters, following worse-than-expected borrowing figures, meant the economy ended 2015 on a sour note.

December’s revisions from the Office for National Statistics (ONS) meant growth stood at 0.4% in the three months to the end of September, down from the initial estimate of 0.5%.

Expansion was also revised down to 0.5% for the quarter to the end of June, from the initially robust 0.7% previously recorded.

Also, public sector finance figures for November showed that government borrowing increased by £1.3 billion year-on-year to a worse-than-expected £14.2 billion.

Growth predictions have also been cut for 2015 as a whole after the December revisions by the ONS, with most economists forecasting expansion to have slowed to around 2.2% from nearly 3% in 2014.

IHS chief UK and European economist Howard Archer said: “The December manufacturing purchasing managers’ survey disappointingly showed further moderation in activity after October’s spike to a 16-month high.

“Furthermore, the pretty lacklustre December PMI suggest that 2016 is also likely to be challenging for manufacturers.”

Martin Beck, senior economic adviser to the EY ITEM Club, added: “The sector is struggling to eke out growth, it looks like manufacturers are unlikely to have made more than a marginal contribution to gross domestic product growth in the last quarter of the year.”

Manufacturing accounts for around 10% of the UK economy.

Photo from David Jones / PA Wire