UK factory output shrinks in Q3; exports drop

UK's performance in the third quarter further slowed down. The gross domestic product (GDP) growth rate in July-September quarter was at 0.6 percent lower than 0.7 percent in the previous quarter.

The UK's manufacturing sector suffered major negative growth rate this year after second and fourth quarters in 2012. The factory output slipped into the negative at -0.5 percent in the second quarter of 2015 from previous 0-0.2 percent in the first quarter.

Economists say that the UK's manufacturing is witnessing its third recession within a decade.

The surging of British pound is eroding the competitiveness of the UK's exports. The UK-based manufacturers are finding it difficult to be competitive in the global market. Products made in the UK has become expensive as the pound rises.

The manufacturing sector accounts for one-tenth of the UK economy.

Adding further to the woes, the slowdown in China's economy has further impacted the factory output in the UK.

China is the UK's sixth largest export market. During the second quarter, the UK with 0.7 percent GDP growth rate surpassed G7 growth rate of 0.6 percent and EU's 0.4 percent.

The continuous dwindling down of exports for the past six months has become a major cause for the UK's economy. The demand in the European Union (EU) for the UK exports has been sluggish as the British Pound's gain against the euro.

The manufacturing sector is believed to be near stagnant and impacting the economy in the most negative way.

Though domestic demand is growing, external risks are much heavier on the economy. Bank of England prefers to keep the interest rate at a lower level. The sluggish manufacturing sector and surging British Pound are major concerns for Bank of England.

The slump in the construction sector has also influenced the UK economy in a negative way. The UK economy slowed down during the third quarter more than economists' forecasts.

The UK has recorded a continuous economic growth for two years and started slowing down during the past six months.

The UK's construction sector dropped mainly due to the strengthening pound as it hit the exports. The increasing uncertainty and sluggish global economy are also slowing down the momentum of UK's economy.

However, the services sector picked up during the third quarter, while the manufacturing sector dropped anew for the third quarter in a row.

Considering the continuous drop in the UK economy during first and second quarters, economists predicted a further drop in the third quarter as well.

Simon Wells, Chief UK economist at HSBC, said: "The manufacturing sector is the biggest cause for concern, where several surveys and official data point to a marked slowing in activity.

Indeed, the manufacturing is already in its third recession in less than a decade, and the level of activity in August 2015 was some seven percent below its 2007 peak."