UK industrial production tumbled by 0.7 per cent in February, in stark contrast to the City’s forecast of a 0.2 per cent rise, as oil and gas extraction and manufacturing output fell.
The unexpected drop in industrial production, revealed in figures published yesterday by the Office for National Statistics (ONS), weighed on the pound.
Sterling was, at 5pm in London, down by 0.86 cents on its close in London on Thursday, at $1.2399.
The pound also lost ground against the euro. The single currency was trading around 85.64p at 5pm, up by 0.34p on its Thursday close.
Further signs of a weaker economic picture emerged in separate ONS figures showing UK construction output fell 1.7 per cent month-on-month in February, having stagnated in January.
And the ONS also revealed the UK’s global goods trade deficit had widened from an upwardly-revised £11.97 billion in January to a worse-than-forecast £12.46bn in February. Exports fell from a downwardly-revised £27.202bn in January to £27.182bn in February.
Howard Archer, chief UK economist at IHS Markit, described the industrial production, construction, and trade figures as “a disappointing package of data for the UK economy which fuels suspicion that growth slowed markedly, largely due to consumers becoming more cautious”.
He added: “We suspect UK GDP (gross domestic product) growth in the first quarter of 2017 slowed to 0.4 per cent – this would be the weakest growth rate since the first quarter of 2016.”
The manufacturing output component of industrial production fell by 0.1 per cent in February. Economists had forecast a 0.3 per cent rise. Manufacturing output fell by one per cent in January.
Comparing the December to February period with the preceding three months, manufacturing output was up by 2.1 per cent.
Oil and gas extraction fell by 2.6 per cent month-on-month in February. It was, in February, down by 0.6 per cent on the same month of last year. The January fall in overall industrial production was yesterday revised from 0.4 per cent to 0.3 per cent.
Ruth Gregory, UK economist at consultancy Capital Economics, said: “February’s data on industrial production and construction supported other evidence that the economy has lost a little momentum in Q1. But growth is likely to have remained fairly solid.”
Capital Economics is forecasting growth of “0.5 per cent or so” for the first quarter. The UK economy grew by 0.7 per cent in the final three months of last year.
The National Institute of Economic and Social Research think-tank yesterday estimated first-quarter growth at 0.5 per cent.
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