(CEP News) - A global recession coupled with a series of downbeat related economic data are expected to be the principle causes of an ongoing contraction in the UK’s manufacturing and industrial production sectors, when the statistics authorities release their February report on Tuesday.

Economists expect a 1.2% month-over-month contraction in January industrial production following a 1.7% fall in December. On an annual basis IP is expected to be 9.9% lower compared to December’s 9.4% annual contraction.

Meanwhile manufacturing production is expected 1.4% month-over-month lower compared to the 2.2% contraction the month prior making for an 11.7% annual rate fall compared to the previous month’s 10.2% decline.

This would mark the 9th consecutive monthly decline in industrial production and the 11th monthly fall in manufacturing output.

Economists at Wachovia are looking to the manufacturing report for clues to how the manufacturing sector fared in Q1, and the extent to which the economy could continue contracting in 2009.

The, “purchasing managers’ indices remained at very low levels in February, indicating that the economy likely contracted further in the start of the first quarter,” reads the reports calling for further declines in both manufacturing and industrial production.

In February, the Chartered Institutes of Purchasing and Supply and The Royal Bank of Scotland’s reports a 1.1 point decline in February’s manufacturing index to 34.7, just shy of December 2008’s all time low of 34.5. A sub 50 reading suggests a state of contraction for the sector.

“A large contraction in output still seems on the cards for January,” agrees a report from Capital Economics citing the decline in the Confederation of British Industry’s output balance index from -35 - 48 in January.

“Manufacturing output is liable to suffer more than industrial production as the latter includes resilient sectors such as utilities,” adds the report.

Meanwhile, an ongoing decline in the pound sterling, perhaps the only thing going well for the UK’s manufacturing sector, is not expected to provide much support given shapr declines in demand from importing countries, according to Howard Archer, Economist at IHS Global Insight.

As a consequence, he expects a 1.1% month-over-month decline in industrial production and a 1.3% fall in manufacturing production.

By Erik Kevin Franco, efranco@economicnews.ca

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Posted in Categories: Economy, Eurozone, Releases, UK, USA.

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