UK Factory Output Down In August

LONDON (AP) -- Manufacturing output in the United Kingdom fell during August, official statistics showed Tuesday, overshadowing more upbeat data on house prices and car sales and suggesting economic recovery will be slow.

The National Institute for Economic and Social Research, a respected think tank, said it believed that Britain's economy had not grown at all during the third quarter. The first official estimates are due on Oct. 12.

Manufacturing output fell by 1.9 percent on the month in August, led by decreases of 2.4 percent in paper, printing and publishing and in the electrical and optical goods sectors, the Office for National Statistics said.

"The industrial production data for August are extremely disappointing and a shock to the system," said Howard Archer, chief European economist at Global Insight.

Meanwhile, new car registrations rose 11.4 percent in September compared to a year ago, boosted by government-backed car scrapping schemes, an industry group said. A major mortgage lender separately said house prices rose 1.6 percent in September, largely because few homes were available to buy.

Despite these improvements, the drop in manufacturing indicates Britain's recovery from recession will be weaker than expected, analysts say.

Duncan Higgins, analyst at exchange dealer Caxton FX, said the pound fell nearly a cent against the dollar following the news.

"The data will raise concerns that the economic recovery in the U.K. is still failing to take a firm hold and continues to lag behind other G-20 nations," Higgins said.

NIESR cited the weak August figures in forecasting a no-growth third quarter. GDP declined 0.6 percent in the second quarter, following a 2.5 percent drop in the first quarter.

For the three months through August, factory output was unchanged overall despite a 7.8 percent rise in transport equipment and 9.3 percent in wood products. Production of consumer durables dropped 1.4 percent, nondurable good fell by 1.6 percent and capital goods rose by 1.4 percent.

Mining and quarrying output fell 2.1 percent in the quarter, dropping to 7.7 percent below year-ago levels. Electricity, gas and water supply rose 0.1 percent.

The Society of Motor Manufacturers and Traders said 367,929 cars were registered in September. Registrations of private cars rose by 41.3 percent last month and year-to-date volumes are now within 1.9 percent of last year's level, the society said.

Registrations in the first nine months of the year, however, lagged 15.5 percent below last year's rate.

The government announced last month that it would extend the car-scrapping plan to cover an extra 100,00 cars and vans. The plan offers discounts of 2,000 pounds ($3,225) to new-car buyers who trade in a model more than 10 years old. The cost is split between the government and the auto industry.

"The 11.4 percent rise in new car registrations exceeds market expectations and is a much more promising increase than the previous two months' rises, giving hope that the industry is on the slow road to recovery," said David Raistrick of Deloitte.

Halifax, the nation's leading mortgage lender, said house prices were now 7.4 percent lower than a year ago. Last week, Nationwide Building Society, the third-largest mortgage lender, said prices rose 0.9 percent in September and had returned to year-ago levels.

Each lender's data is based on its own mortgage lending.

"Continuing increases in unemployment and low earnings growth are likely to constrain the rise in demand," said Halifax economist Martin Ellis.

"There are also some signs that the improvement in market conditions is encouraging more people to put their properties up for sale. This development could loosen market conditions by alleviating the current shortage of supply and curb the pace of house price growth evident in recent months."

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