Industrial production in the U.K. registered an unexpected decline at the start of the year, showing the first monthly fall since August 2009.
Overall industrial production fell 0.4% in January from the prior month, data from the Office for National Statistics showed Wednesday. Economists were expecting a 0.3% growth for January after the 0.5% increase in December.
"Today's data mark an inauspicious start to 2010," said Colin Ellis, an economist at Daiwa Capital Markets Europe. Total production fared a little better than manufacturing as energy extraction and supply increased in January, the economist noted.
ONS data showed that mining and quarrying output rose 1.4% with an increase in oil and gas production output. Energy supply output was up 1.3% on the month.
Reversing a 0.9% monthly rise in December, manufacturing output recorded a decrease of 0.9% in January. That was also the largest fall since August 2009. Consensus forecast was for a 0.2% increase. Output decreased in 11 of the 13 sub-sectors and improved in only two sub-sectors.
Annually, the index of industrial production fell 1.5% in January, smaller than December's revised 3.7% decrease. But the decline was larger than the expected 0.8% drop.
Meanwhile, manufacturing output rose 0.2% from the previous year, logging the first rise since March 2008. Although, January's growth was in contrast to the 1.9% fall in December, 0.2% rise was much smaller than the consensus forecast for 1.4% growth.
According to Ellis, it is possible that the weakness in January was due to disruptions in production caused by bad weather. Also, decline in output may reflect temporary factors and reverse in February. Still, production will be on course to post modest positive rise in the first quarter of this year as a whole, the economist said. Hence, Ellis expects the GDP growth to struggle to pick up to around 3% annually by the turn of the year as the central bank expects.
Elsewhere today, Prime Minister Gordon Brown said the economic recovery is still in early stages and it remains very fragile.
Capital Economics' Jonathan Loynes said January's poor platform indicated that even 0.5% monthly rises in both February and March would leave a quarterly gain similar to that in the fourth quarter. As such, industry is unlikely to drive any significant pick-up in GDP growth in the near-term, the economist pointed out. With weaker trade figures, the outlook for the export-sensitive industrial sector remains pretty fragile, he said.
The latest survey from Markit Economics showed that the Purchasing Managers' Index for the manufacturing sector remained at 56.6 in February, unchanged from January's fifteen-year high. The manufacturing sector continued to expand for a fifth consecutive month, as output and incoming new orders increased in February.
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