U.K. industrial production declined at the fastest pace in almost three years in November as warm weather reduced energy demand.
Industrial output slid unexpectedly by 0.7 percent month-on-month after staying flat in October, figures from the Office for National Statistics showed Tuesday. Production was forecast to grow 0.1 percent in November.
This was the biggest fall since early 2013 as energy production plunged 1.8 percent and mining and quarrying output decreased 1.6 percent.
Similarly, manufacturing output dropped 0.4 percent, confounding expectations for a 0.1 percent rise. Output had decreased 0.4 percent in October as well.
It now looks highly unlikely that industrial production was of any help to GDP growth in the fourth quarter of 2015, IHS Global Insight's Economist Howard Archer said.
Industrial production will need to have grown by 0.3 percent month-on-month in December just to have been flat over the quarter, Archer added.
On a yearly basis, industrial production advanced 0.9 percent, but the weakest expansion since July. Output was forecast to grow 1.7 percent again as seen in October.
At the same time, manufacturing output declined at a faster pace of 1.2 percent, following a 0.2 percent drop a month ago. Economists had forecast a 0.8 percent decline for November.
"It is unlikely that we will see a sea change in the manufacturing sector's fortunes this year either," Ruth Miller, a UK economist at Capital Economics, said.
Given the strong pound and the continued weakness of demand in the neighboring Eurozone, she doubts that the recovery in the export-orientated manufacturing sector will get back on track soon.
According to an annual survey from the EEF this week, Britain was becoming less competitive as a manufacturing hub. Manufacturers expect 2016 to be a year of tough decisions and more prominent risks.
While the recent weakening of the pound and weakened oil and commodity prices are welcome news for UK manufacturers, they will be concerned by the current uncertain global economic outlook, Archer noted.
Manufacturing export sales balances dropped to the lowest level since 2009, close to stagnation, in the fourth quarter of 2015, a survey by the British Chambers of Commerce revealed last week.
The BCC survey also showed that manufacturers are planning to raise prices sharply in the next 12 months and to invest more in plant and machinery. Such intentions indicate that the sector is keen to make the most of low inflation and low interest rates to improve productivity, the business lobby said.
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