Manufacturing output dropped by 1.1 per cent in August and the trade deficit widened, dampening prospects for a sustained recovery in the second half of the year, according to the Office for National Statistics (ONS).
The country’s goods trade deficit widened more than expected to £9.8bn, as exports fell and oil imports rose, and its total trade deficit, which includes buoyant services exports, rose to its second highest on record. While industrial output, which includes energy production and mining, fell 0.5 per cent on the month in August, in line with expectations, after a 2.8 per cent rise in July.
The data caused a drop in the sterling to dollar ratio to a new one-month low, while UK share prices also declined and the International Monetary Fund (IMF) slashed its forecasts for the UK economy, predicting a 0.4 per cent contraction and sluggish growth for next year.
The country did achieve some growth in the third quarter, as production bounced back from the effect of an extra public holiday in June, and ticket sales for the London Games added to GDP. While retailers saw a solid rise in sales last month and house prices fell at a slower rate.
However, a combination of increasing concerns about government spending cuts that hamper growth and the euro zone debt crisis have dented confidence and business leaders are expressing their concerns at the Conservative party conference, although the Chancellor is determined not to waver from his austerity plans.
However, the IMF has said that Mr Osborne may need to defer some spending cuts planned for next year if the economy is much weaker than forecast and that the Bank of England may need to loosen policy further.
As an accountant, Sarah Jenkins, specialises in management accounting, business development and financial reporting.