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U.K. Manufacturing Rises Most Since July on Machinery Output

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U.K. Manufacturing Rises Most Since July
Factory output rose 1.6 percent from November, the Office for National Statistics said today in London.Photographer: Paul Thomas/Bloomberg

Feb. 7 (Bloomberg) -- U.K. manufacturing production had its biggest monthly increase in December for five months, boosted by output of machinery and equipment and chemical products.

Factory output rose 1.6 percent from November, when it fell 0.3 percent, the Office for National Statistics said today in London. The increase was double the median forecast in a Bloomberg News survey. Total industrial production rose 1.1 percent, helped by a 3.2 percent increase in oil and gas production.

The figures suggest manufacturing gained momentum heading into the new year, easing concerns that Britain may slip back into a recession. With a survey of purchasing managers showing manufacturing activity expanded for a second month in January, the Bank of England today refrained from increasing stimulus as officials monitor inflation pressures in the economy.

“With more North Sea oil and gas production set to come on stream over the next couple of months, we anticipate another decent figure next month,” said James Knightley, an economist at ING Bank NV in London. “Furthermore, with the PMI for January also showing growth, this offers further indication that the U.K. will probably avoid the fate of dipping into recession three times in the space of five years.”

‘Slow’ Recovery

The Bank of England kept its quantitative-easing target at 375 billion pounds ($588 billion) today, as forecast by all 43 economists in a Bloomberg News survey. In a statement accompanying the announcement, the central bank said the economy was set for a “slow but sustained recovery” and that officials stood steady to provide extra stimulus if needed.

The pound stayed higher against the dollar and was trading at $1.5703 as of 12:15 p.m. in London, up 0.3 percent on the day.

In the fourth quarter, industrial production fell 1.9 percent instead of the 1.8 percent fall estimated in gross domestic product figures published on Jan. 25. Manufacturing fell 1.3 percent rather than 1.5 percent. Both were the biggest declines since the first quarter of 2009. Oil and gas production plunged 14.1 percent, the most since records began in 1997, due to extended maintenance at the Buzzard oil field, the largest in the North Sea, and an unplanned shutdown at the Theddlethorpe gas terminal.

The ONS said the industrial production figures will subtract 0.01 percentage point from GDP in the fourth quarter. An initial estimate showed the economy contracted 0.3 percent during the period.

Return to Normal

In December, output of machinery and equipment rose 8 percent and production of chemical products gained 5.6 percent, the statistics office said. There was also a 1.5 percent gain in output of food, beverage and tobacco products. With the Buzzard oil field back up and running, oil and gas production returned to more normal levels in December, the statistics office said. Buzzard produces 200,000 barrels of oil a day, or half of the total Forties blend stream.

In a separate report, the ONS said the trade deficit narrowed to 8.9 billion pounds in December from 9.3 billion pounds the previous month, in line with the median forecast in a Bloomberg News survey. Exports rose 3 percent and imports increased 1.1 percent, boosted by a record jump in oil imports.

The figures were helped by demand from countries outside of the European Union, with exports surging 11.7 percent. Exports to other EU countries fell 4.8 percent.

Euro-area gross domestic product probably fell 0.4 percent last year and will contract 0.1 percent in 2013 as the sovereign-debt crisis persists, according to Bloomberg’s monthly survey of economists published in January.

To contact the reporter on this story: Jennifer Ryan in London at jryan13@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net

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