U.K. Factory Production Increases More Than Forecast: Economy

U.K. industrial production rose more than economists forecast in September, helped by a rebound in manufacturing after a slump the previous month.

Output increased 0.9 percent from August, when it fell 1.1 percent, the Office for National Statistics said today in London. The median forecast of 28 economists in a Bloomberg News survey was for an increase of 0.6 percent. In Germany, separate data showed a gain in factory orders that also exceeded economists’ predictions.

The European Commission raised its forecasts for the U.K. yesterday and said the outlook has “improved substantially.” The economy grew 0.8 percent in the three months through September, and Markit Economics said this week that its industry surveys for October point to an acceleration at the start of this quarter.

“Manufacturers will be hoping that the recent extended good news on the U.K. economy further lifts business and consumer confidence which in turn translates into sustained higher demand,” said Howard Archer, an economist at IHS Global Insight in London. “Encouragingly, there is evidence in recent surveys that businesses are now gradually lifting their investment plans.”

The pound stayed higher against the dollar after the report and was up 0.3 percent from yesterday at $1.6087 as of 11:59 a.m. in London.

Factory production surged 1.2 percent on the month, also exceeding economists’ estimates, and reversing the 1.2 percent drop in August.

‘Minimal’ Effect

In the three months through September, industrial production rose 0.6 percent, above the 0.5 percent increase estimated in preliminary gross domestic product data for the period. The statistics office said the impact of the latest production figures on the third-quarter GDP estimate will be “minimal.”

Within industrial production, mining and quarrying increased on the month, while electricity and gas was unchanged. The increase in manufacturing was led by basic pharmaceuticals, transport equipment and consumer and electronic products. Of the 13 manufacturing sectors, seven increased in September from August, while six declined.

From a year earlier, industrial production was up 2.2 percent in September, the biggest annual increase since January 2011. Factory output increased 0.8 percent from a year earlier.

In Germany, factory orders jumped 3.3 percent in September from the previous month, when they fell 0.3 percent, the Economy Ministry in Berlin said. Economists forecast a gain of 0.5 percent, according to the median estimate in a Bloomberg survey. Orders advanced 7.9 percent from a year ago, when adjusted for the number of working days.

Commission Forecasts

The European Commission yesterday predicted that the euro-area economy will grow 1.1 percent in 2014, less than the 1.2 percent forecast in May, after shrinking 0.4 percent this year. However, it said that U.K. GDP will rise 1.3 percent this year and 2.2 percent next year, more than previously projected.

The National Institute of Economic and Social Research also lifted its forecasts for the British economy this week, while the Bank of England will probably upgrade its outlook when it releases new projections on Nov. 13.

Adding fuel to the recovery is the strengthening housing market, which Niesr cited yesterday in justifying its higher outlook for GDP. Home values rose for a ninth month in October, gaining 0.7 percent, according to a report today from Halifax, the mortgage unit of Lloyds Banking Group Plc.

The central bank’s Monetary Policy Committee will keep the benchmark interest rate at a record-low 0.5 percent tomorrow, while the bond-purchase plan will stay at 375 billion pounds ($603 billion), according to Bloomberg surveys.