UK industrial output strengthens

Data released by the Office for National Statistics (ONS) reported that UK factory output rebounded in January, after falling in December.

Manufacturing output rose 0.7% in the month, following a fall of 0.3% in December. This represents the first monthly rise in four months, and was greater than the 0.2% increase forecasted by economists [1].

The pound rose against both the dollar and the euro following the report.

However, output in the industrial sector as a whole rose by only 0.3% month-on-month in January. This was weaker than expected, and determined by a 6.3% drop in crude oil and gas extraction in the North Sea [1].

Total production, accounting for just over 10% of the British economy, fell 0.4% in the fourth quarter instead of the 0.5% previously reported. The ONS said this will have no impact on overall growth [2].

Chancellor, George Osborne, has warned that the economy is facing a “dangerous cocktail” of risks from overseas in 2016, as growth slows in major emerging markets, stock markets tumble, and oil prices slump amid fading global demand [3].

Economists say the referendum on European Union membership could also drag on growth.

Analyst at Deloitte, Mark Stephenson, said: “The challenges UK manufacturers are up against should not be underestimated” [1].

“Slow global economic growth, weak Chinese trade data, downgraded UK growth forecasts, turmoil in the steel industry and [surveys of the sector] at its lowest point for almost three years, are just some of the factors at play,” he added [1].

[1] Telegraph. ‘Pound rises as Britain’s factories roar back into life’.
[2] Bloomberg. ‘UK industrial output rebounds on manufacturing, utilities’.
[3] Reuters UK. ‘UK industrial output returns to growth in January, manufacturing strong’.