GDP down as manufacturing decline takes its toll on Q2
UK ECONOMIC growth remained sluggish in the second quarter as a decline in production output contributed to an unrevised GDP growth estimate of 0.2%.
Various factors such as the Royal Wedding, extra bank holidays and the aftermath of the Japanese earthquake all played a part in the figures, the Office for National Statistics said.
The ONS data shows production output decreased 1.6% in the three month period. However, the construction sector and the service industry were both positive, showing growth of 0.5% each.
Overall, GDP increased 0.7% in Q2 compared with 2010.
The figures support concerns about the current health of the manufacturing sector. There are fears the boom in the sector which initially spurred recovery may be coming to an end.
While many manufacturers are currently reporting growth, these are based on performance during the first six months of the year. The second half may prove tougher unless more orders can be found, which is why firms are being advised to look for new opportunities in faster growing markets such as Latin America and the Far East.
The latest ONS data shows production decreased 1.6% in Q2 and while many analysts will be hoping this is a one-off, concerns will remain. The extent of decline is evident in that production declined just 0.1% in the first quarter of the year.
Overall, production decreased by 0.8% between 2011 Q2 and 2010 Q2. Mining and quarrying were the hardest hit sectors.
The increase in construction was welcome. The sector saw an increase of 0.5% compared with a decrease of 3.4% in the previous quarter. Construction increased 1.4% between 2011 Q2 and 2010 Q2.
Foreign visitors in the UK for the Royal Wedding together with the unseasonable weather helped boost the distribution, hotels and restaurants sector.
The sale of Olympic tickets was also treated as a unique event during the period. In its statement, the ONS said: “The sale of the bulk of Olympic tickets took place in 2011Q2 (May) and amounted to around £300m, equivalent to 0.1% of GDP.”
However, it said that due to international national accounting conventions, these payments could not count as part of GDP. For now, they count as prepayments for services which will be received later. The figures will be recorded in household final consumption expenditure in Q3 next year, once the Games have taken place.
