U.K. Industrial Output Surges More Than ForecastFergal O’Brien
U.K. industrial production rose more than economists forecast in February, bolstered by a surge in factory output that points to a strengthening recovery.
Production increased 0.9 percent from January, exceeding the 0.3 percent median forecast of 26 economists in a Bloomberg News survey. In its gross-domestic-product estimate published after the data, the National Institute of Economic and Social Research predicted economic growth accelerated to 0.9 percent in the first quarter, the quickest pace in four years.
The data came as the International Monetary Fund upgraded its outlook for the U.K. economy and said GDP may rise 2.9 percent this year, the fastest of any Group of Seven nation. While the Washington-based fund also said Britain’s recovery has been unbalanced, Niesr said in its report that growth last quarter was “relatively broad-based.”
“A strong and increasingly better-balanced recovery continues,” said Martin Beck, an economist at the EY Item Club. “February’s industrial production numbers suggest that the sector’s recovery is back in full swing.”
The pound climbed toward the highest level in more than four years, rising 0.8 percent to $1.6744 at 2:50 p.m. London time. It reached $1.6823 on Feb. 17, the highest level since November 2009.
The jump in production in February was the biggest in eight months, and manufacturing, which surged 1 percent, contributed 0.7 percentage point to that expansion. Within manufacturing, growth was led by basic pharmaceutical products, transport equipment and food.
The data, along with trade tomorrow and construction on April 11, will feed into the first official GDP estimate on April 29. Growth of 0.9 percent would be the fastest since the second quarter of 2010, when the economy expanded 1 percent.
Industry may have made a “robust contribution” to first-quarter growth, said Samuel Tombs, a London-based economist at Capital Economics Ltd. It’s “reassurance that the economic recovery has remained strong and broad-based,” he said.
From a year earlier, production increased 2.7 percent and manufacturing rose 3.8 percent, the ONS said. The annual surge in factory output was the most since February 2011. Industrial output remains 11.7 percent below where it was when gross domestic product peaked in the first quarter of 2008. Manufacturing is 8.2 percent smaller.
Bank of England officials have pledged to hold their key interest rate at a record low at least until unemployment, now at 7.2 percent, falls to 7 percent. All 50 economists in a Bloomberg survey forecast the benchmark rate will stay at 0.5 percent when the Monetary Policy Committee announces its next decision on April 10.
“A sizable negative output gap remains,” Niesr said. “With economic recovery still in its infancy, we do not expect the MPC to change monetary policy, via an increase in interest rates, until the middle of 2015.”