U.K. Industry Production Stagnates as Construction Falls
U.K. industrial and manufacturing production unexpectedly stagnated in November and construction fell the most in more than a year, indicating the economy may have struggled to build momentum in the fourth quarter.
Industrial output, which accounts for about 15 percent of the economy, was forecast to have increased 0.4 percent in November, according to the median of 25 estimates in a Bloomberg survey. Oil and gas extraction fell 3 percent, partly due to a drop in North Sea oil. Factory output was also forecast to have risen 0.4 percent.
The data were published today by the Office for National Statistics in London. In a separate report, it said that construction, accounting for another 6 percent of gross domestic product, fell 4 percent, the most since June 2012.
This is “something of a reality check for those getting a little carried away by the strength of the U.K. recovery,” said James Ashley, an economist at RBC Capital Markets in London. “The recovery remains broadly on track -– but today’s data are a reminder that we have not yet reached the sunlit uplands that would pave the way towards thoughts of policy tightening.”
U.K. economic growth slowed to 0.7 percent in the fourth quarter from 0.8 percent in the previous three months, the National Institute of Economic and Social Research estimated today. The Bank of England kept its key interest rate at a record low yesterday and will publish new forecasts next month.
The pound was little changed at $1.6490 as of 3:15 p.m. London time.
In France today, data showed that industrial production increased 1.3 percent in November from October. Economists had forecast a 0.4 percent gain, based on the median of 16 estimates in a Bloomberg survey. Manufacturing output rose 0.2 percent.
European Central Bank President Mario Draghi said yesterday that recent data and indicators continue to point to a “gradual” recovery in the euro-area economy, though he maintained a cautious outlook.
“We want to see confidence staying for a relatively long time before we can say we declare victory,” he said after the ECB kept its benchmark rate at a record-low 0.25 percent.
The U.K. report showed that industrial output rose 2.5 percent in November. Manufacturing increased 2.8 percent in that period. In the three months through November, industrial production rose 0.3 percent compared with the previous quarter, while manufacturing posted a 0.6 percent gain.
Within manufacturing, eight of 13 categories rose in November from the previous month. The weakness was led by transport and basic pharmaceuticals.
The data signal “GDP growth in the fourth quarter is unlikely to be quite as strong as the business surveys have indicated,” said Samuel Tombs, an economist at Capital Economics Ltd. in London. Still, prospects for income growth and business investment suggest “2014 should be a year of continued expansion in industrial production.”
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