Production in the British industrial sector shrank notably in June mainly due to extra holidays for the Queen's Diamond Jubilee celebrations, the latest figures from the Office for National Statistics (ONS) showed Tuesday.
However, the decline was not as steeper as expected and is likely to lead to an upward revision in the second quarter GDP figures.
Industrial production fell 2.5 percent month-on-month compared to expectations for a 3.5 percent drop. This followed a 1 percent increase in May and 0.6 percent decline in April. Production has now fallen for fifteen consecutive months.
Output fell 0.9 percent sequentially in the second quarter. Data signals an upward revision to the GDP of approximately 0.07 percentage points, ONS said. According to preliminary estimates, the GDP contracted 0.7 percent in the second quarter.
"The figures do not change the overall picture of a sector struggling to grow in response to rapidly weakening overseas demand," said Samuel Tombs, an economist at Capital Economics.
Manufacturing output fell 2.9 percent month-on-month, compared to the expected 4.3 percent drop. In May, factory output rose 1.2 percent.
The moving of the late May bank holiday to June and the additional bank holiday for the Queen's Diamond Jubilee were the likely contributing factors to the monthly decline in the production and manufacturing sectors, the statistical office said.
"There can be little doubt from the size of the drop in output that the underlying performance of the manufacturing sector was very weak in June," IHS Global Insight Chief U.K. Economist Howard Archer said.
"Domestic demand for manufactured goods is handicapped by current muted investment intentions, still serious headwinds facing consumers and tightening public spending."
Output of mining and quarrying industry grew 2 percent month-on-month in June, while energy output shrank 1.2 percent. Production of electricity, gas, steam and air conditioning plunged 4.9 percent.
Annually, industrial production dropped 4.3 percent in June. This compares to forecast for a 5.3 percent decline. Manufacturing production also fell 4.3 percent annually, while expectations were for a 5.7 percent fall.
The latest purchasing managers' survey suggested that the U.K. manufacturing sector contracted at the fastest rate since March 2009 in July due to substantial declines in output and new orders. Weak demand from Eurozone remained the principal drag on new foreign orders.
The Bank of England is expected to downgrade its economic growth forecast, while presenting the latest inflation report on Wednesday. The central bank refrained from announcing more stimulus in its rate-setting session last week.
The National Institute of Economic and Social Research said early this month that economic growth in the U.K. will be restrained by weak demand in the world economy, in particular the euro area.
The think tank expects the economy to contract 0.5 percent this year and rebound next year with 1.3 percent growth.
by RTT Staff Writer
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