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Manufacturing and industrial output stagnates despite growth prediction

UK manufacturing output and broader industrial production stagnated in November, defying City expectations of growth, as construction activity tumbled by 4%, official figures have revealed.

The figures, published yesterday by the Office for National Statistics, came hard on the heels of a British Retail Consortium survey showing year-on-year growth in UK retail sales value slowed further in December to its weakest for a year, excluding Easter-related distortions in April.

Economists estimated, in the wake of the latest batch of economic indicators, that UK growth would have slowed slightly in the fourth quarter of last year.

The National Institute of Economic and Social Research, an independent think-tank, yesterday estimated UK gross domestic product would have grown by 0.7% in the fourth quarter. It estimated the UK economy would have grown by 1.9% during 2013 as a whole, leaving output 1.2% below its pre-Great Recession peak.

The ONS is due to publish fourth-quarter GDP data later this month.

Manufacturing output and broader industrial production, which also takes in mining and quarrying, oil and gas extraction, and electricity, gas and water supply, were flat between October and November. The City had forecast rises of 0.4% in both manufacturing output and industrial production.

Oil and gas extraction fell by 3% between October and November, the sharpest month-on-month drop since March 2013.

The ONS said: "The decline of oil and gas extraction over the past 13 years has provided downward pressure on production. This can predominantly be attributed to North Sea oil and gas reserves becoming increasingly challenging to extract and ageing extraction equipment requiring extensive repairs and maintenance."

Separate ONS figures showed UK construction output fell by 4% month-on-month on a seasonally-adjusted basis in November. The ONS noted both sub-sectors suffered declines in activity, with a 3.9% fall in new construction work, and a 4.2% drop in repair and maintenance.

Industrial production in November was up 2.5% on the same month of 2012, according to the ONS, marking a slowing from a year-on-year pace of increase of 3.2% in October.

Manufacturing output in November was up 2.8% on a year earlier. This was the sharpest year-on-year rise in manufacturing output since May 2011, in spite of the stagnation between October and November.

Howard Archer, chief UK economist at consultancy IHS Global Insight, said: "Flat industrial production and a 4% fall in construction output provide a double dose of disappointing hard data on the UK economy.

"While much will still depend on what happens in the dominant services sector, it looks increasingly likely that GDP growth in the fourth quarter of 2013 slowed from the 0.8%...rate achieved in both the third and second quarters. This suspicion is reinforced by evidence that retail sales lost significant momentum in the fourth quarter and were no more than respectable over Christmas."

He added: "The disappointing industrial production and construction output figures are likely to reinforce belief with the Bank of England that interest rates need to stay down at 0.5% for some considerable time to give the economy every chance of developing broad-based sustainable growth."

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