Manufacturing drop: Tripping towards a triple dip?

A steel manufacturing plant in Wolverhampton in the Midlands Photo: David Jones/PA Wire

Statistics have the power to shock, to bore, or indeed to be entirely irrelevant. But this morning's figures from the factory floor, coming a week before the Budget, will have made unpleasant reading for the Treasury.

Manufacturing shrank in January by 1.5% - part of the wider production sector which fell back by 1.2%. City economists have reached for the calculators with these worse-than-expected figures, and have rebooted their assessments of what is really going on in the economy at the moment.

Today's figures will make make for uncomfortable reading for the Treasury Credit: Dominic Lipinski/PA Wire

With these grisly figures going the wrong way, economists at the National Institute of Economic and Social Research predict the total output of all we make and do will shrink in the first three months of this year. Deutsche Bank reckons it will be around zero with a real risk of a triple dip recession. Goldman Sachs' sums suggest there will be a tiny bit of growth at 0.2%.

Because the economy shrank slightly between October and December last year, if it contracts again between January and March it would technically be in recession. A third slowdown, off the back of the recessions in 2008 and 2011/12, would be unprecedented.

It is worth remembering that the moves are so marginal that if you take out problems with North Sea oil production at the end of last year, it is not entirely clear that there really was a 'double dip' last year at all. But the political and psychological results of a 'triple dip' would be profound, even though it would be shallow and, economically speaking, not a big shift at all.

If you ignore the problems with North Sea oil production last year it is not clear that the economy went back into recession Credit: Eye Ubiquitous/Press Association Images

The pound took another hammering today, in part because the figures were worse than expected, falling this morning to its lowest level against the dollar for two-and-a-half years. This illustrates that the markets have more faith in America turning its economy around than us.

But if the pound is weak, doesn't that mean it is more tempting for people to buy British goods at knockdown prices? The sad fact, also shown by the stubbornly big gap between what we sell abroad and import, is that the weak currency is not having the desired effect. Today's trade figures show a tiny narrowing in the gap, but only because total imports fell more than total exports - the total amount we sell abroad is still on the way down.