Bloomberg News

U.K. Industrial Production Increases Less Than Forecast

August 06, 2014

U.K. Industrial Production Increases Less Than Forecast

The report adds to signs some areas of the recovery are softening, with manufacturers battling a stronger pound and strains in the euro area, Britain’s biggest trading partner. Photographer: Simon Dawson/Bloomberg

U.K. industrial production rose less than economists forecast in June and the output estimate for the second quarter was revised lower.

Production increased 0.3 percent from May, when it fell 0.6 percent, the Office for National Statistics said in London today. The median forecast of 32 economists in a Bloomberg News survey was for an increase of 0.6 percent. Output in the second quarter rose 0.3 percent, below the 0.4 percent estimate published in last month’s gross domestic product data.

The report adds to signs that parts of the recovery are softening, with manufacturers battling a stronger pound and strains in the euro area. The National Institute for Economic and Social Research estimated today that U.K. economic growth slowed at the start of the third quarter.

“The last couple of months do hint at some cooling off in the near-term momentum,” said Alan Clarke, an economist at Scotiabank in London. “Euro-zone demand for our exports is still sluggish to it is hard to get too upbeat from here.”

The pound extended its decline against the dollar after the data were published and was 0.3 percent weaker at $1.6833 at 3:22 p.m. London time. Sterling has risen 11 percent in the past 12 months, making it the best performer in a basket of 10 developed-nation currencies tracked by Bloomberg.

Bank of England officials start their two-day policy meeting today as they assess the economy’s ability to withstand higher interest rates. While all 47 economists in a Bloomberg News survey say the Monetary Policy Committee will leave the key rate at a record-low 0.5 percent, some forecasters predict an increase will come as soon as November.

Output Gap

The statistics office said the revision to second-quarter production will have a “minimal” impact on the GDP estimate published on July 25. That showed the economy grew 0.8 percent.

In a statement after the production data, Niesr said U.K. GDP growth probably eased to 0.6 percent in the three months through July. It also said “while the economy regained its pre-recession size recently, a significant output gap remains.”

Within production, mining and quarrying dropped 1 percent in June from the previous month, while oil and gas extraction fell 1.3 percent, the ONS said.

Today’s report also showed that manufacturing output rose 0.3 percent in June from May, half the increase forecast by economists. From a year earlier, factory output increased 1.9 percent, with total production up 1.2 percent.

Within manufacturing, growth was driven by transport equipment, basic metals and food. Of 13 manufacturing categories, eight registered declines on the month, with the remainder increasing.

A Markit Economics index published last week showed factory growth cooled to the slowest pace in a year in July as new orders and output cooled. At 51.5, the gauge still showed expansion continued into a 17th month.

To contact the reporters on this story: Jennifer Ryan in London at jryan13@bloomberg.net; Jillian Ward in London at jward98@bloomberg.net

To contact the editors responsible for this story: Craig Stirling at cstirling1@bloomberg.net Fergal O’Brien


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