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U.K. Industrial Production Rises, Factory Output Falls

U.K. Industrial Production Rises, Factory Output Falls
4/5/2012 6:12 AM ET

Industrial production in the U.K. increased in February helped by higher energy and utilities output, while manufacturing production fell for a second month raising doubts if the weather-related upswing in overall industry is sustainable.

The Office for National Statistics said Thursday that industrial production increased 0.4 percent month-on-month in February, in line with economists' expectations. This followed a 0.6 percent decline in production in January, which was revised from the originally reported 0.4 percent fall.

The gain largely reflected weather-related rebound in production of utilities, as well as a recovery in mineral and energy extraction, which had seen substantial falls over the past 3-6 months, ING Bank Economist James Knightley said.

On the other hand, manufacturing output fell 1 percent from a month earlier, while expectations were for a 0.1 percent increase. January saw factory output falling 0.3 percent after a 1.1 percent growth. The January result was revised from 0.1 percent growth reported initially.

"After a recent series of improved surveys on the U.K. economy, the unexpected sharp drop in manufacturing output in February is a sharp reminder that the economy still has its work cut out to return to sustainable decent growth," IHS Global Insight Chief Economist Howard Archer said.

The most recent purchasing managers' survey for the manufacturing sector show that the factory sector is in a better shape than indicated by the current data. Manufacturing activity rose at the strongest pace in ten months in March. Annually, overall industrial output fell 2.3 percent, faster than the forecast for a 2.1 percent drop. Factory output declined 1.4 percent year-on-year against expectations for a 0.1 percent increase.

Detailed break-down of the data show that mining and quarrying output rose 3.8 percent month-on-month in February, ending five months of contraction. Utilities output increased 6.1 percent, marking the first increase in six months.

Output of oil and gas extraction industries increased for the fist time in four months, posting a 4.6 percent growth. After a five-month bout of declining production, energy industries reported a 5.2 percent month-on-month increase in output in February.

The economy contracted 0.3 percent in the fourth quarter, but economists expect the gross domestic product to have risen in the first quarter of 2012, helping the economy skip a technical recession.

The British Chambers of Commerce said Tuesday that the economy is showing signs of improvement and may avoid a recession, though the overall picture is still "weak." The BCC survey also indicated that the manufacturing sector is in a good shape in the first quarter.

by RTT Staff Writer

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