U.K. July Industrial Production Surges Most in 25 Years: Economy
U.K. industrial production surged in July by the most in 25 years as manufacturing rebounded from the disruption caused by the extra public holiday for the Queen’s Jubilee.
Production rose 2.9 percent, the most since February 1987, after falling 2.4 percent in June, the Office for National Statistics said today in London. The median forecast of 28 economists in a Bloomberg News survey was for a gain of 1.5 percent. In Germany, industrial output unexpectedly increased 1.3 percent, separate data showed.
The U.K. surge indicates some strength in the economy after it shrank 0.5 percent in the second quarter, partly due to the jubilee holiday. Still, while gauges of services and manufacturing improved in August, the Bank of England has said the outlook is “unusually uncertain,” and economists forecast that it will expand stimulus again later this year.
“It looks like the bounceback is going to be a bit stronger, and you can be much more confident that there will be positive growth in the third quarter,” said Ross Walker, an economist at Royal Bank of Scotland Group Plc. “It’s still a fairly fragile recovery. The Bank of England may still deliver more quantitative easing.”
The U.K. report also showed that factory output increased 3.2 percent in July from June, the biggest gain in 10 years. The increase, which also exceeded economists’ median forecast, followed a 2.9 percent drop the previous month.
Out of 13 categories in manufacturing, 11 rose and two declined in July from the previous month. The gain was led by basic metals and metal products, as well as transport equipment. From a year earlier, manufacturing fell 0.5 percent, while industrial production dropped 0.8 percent.
“These figures mark a very positive start to the third quarter for the manufacturing sector,” said Nida Ali, an economist at Ernst & Young’s ITEM Club. “Having said that, the euro-zone crisis continues to cast a sizeable shadow.”
European stocks rose today, extending yesterday’s biggest rally in a month, as investors awaited a U.S. report on payrolls and unemployment. The Stoxx Europe 600 Index advanced 0.4 percent, taking its gain this week to 2.5 percent after the European Central Bank announced an unlimited bond-purchase program to calm the region’s debt crisis.
U.S. payrolls probably rose at a slower pace in August, keeping unemployment in the U.S. above 8 percent, economists said before the jobs report. An additional 130,000 workers were taken on last month following a 163,000 increase in July, according to a Bloomberg survey. The jobless rate may have held at 8.3 percent, the survey showed. The Labor Department’s report is due at 8:30 a.m. in Washington.
In the U.K., the statistics office said revisions to industrial-production data are estimated to add 0.05 percentage points to gross domestic product in the first quarter, when the economy shrank 0.3 percent. They will have a “minimal impact” on the second quarter. The ONS also published producer-price data for August showing that factory output prices rose 0.5 percent from July. Input prices rose 2 percent.
The Bank of England cut its forecasts for the economy last month, while the Organization for Economic Cooperation and Development lowered its U.K. outlook yesterday. The OECD said GDP will fall 0.7 percent this year instead of the previously predicted increase of 0.5 percent.
While the central bank kept its bond-purchase target at 375 billion pounds ($599 billion) yesterday, economists forecast that it will expand stimulus by 25 billion pounds before the end of the year, according to the median projection in a Bloomberg survey.
In Germany, trade data today showed that exports unexpectedly increased 0.5 percent in July from June, when they fell 1.4 percent. Economists forecast a 0.5 percent decline, according to the median of 12 estimates in a survey. Imports gained 0.9 percent.
The German industrial production report showed output of investment goods increased 3.8 percent in July, while construction activity rose 1.9 percent. Overall production fell 1.4 percent from a year earlier when adjusted for working days.
In the Asia-Pacific region today, Australia recorded a wider-than-estimated trade deficit in July. Malaysian exports unexpectedly fell 1.9 percent in July from a year earlier after a 5.4 percent gain the previous month.
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