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Schroders: Sharp fall in UK manufacturing signals triple dip recession

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Schroders European economist Azad Zangana says the sharp contraction in manufacturing in October could signal a triple dip recession for the UK in the fourth quarter of 2012.

Zangana says the UK manufacturing output data surprised on the downside with a sharp contraction in October of 1.3 per cent compared to a month earlier. The economist says consensus expectations were for a 0.8 per cent gain on the month.

He says: “Industrial production overall – which includes manufacturing – contracted by 0.8 per cent in October, following a downwardly revised contraction of 2.1 per cent in September.

“These figures suggest there is a strong chance the UK economy could triple dip in the fourth quarter. The weakness in manufacturing and the wider production sector highlights the impact of the eurozone crisis, as exporters struggle to find sufficient demand. This was also highlighted by the poor trade statistics published yesterday. Overall, without a significant improvement in overseas growth, we are unlikely to see the desired rebalancing in activity towards manufacturing and exports.”

The UK exited the double dip recession after reporting growth of 1 per cent during the third quarter of 2012, following three quarters of negative growth. The economy first went into recession during 2008, before coming out again in 2009.

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