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UK November industrial production very weak, GDP could contract-UPDATE

Date: Thursday 12 Jan 2012

UK November industrial production very weak, GDP could contract-UPDATE

Industrial production in the United Kingdom fell by 0.6% on the month (3.1% on the year) in November, according to the latest data out this morning from the Office for National Statistics.

The consensus estimate was for a fall of 0.1% on the month.

Furthermore, the previous month’s variation was revised down to a fall of 1.0%, from a preliminary estimate of -0.7%.

Manufacturing output meanwhile contracted at a 0.2% pace versus the previous month and by another 0.6% when compared to the same month of 2010.

October’s decrease was also revised, to down by 0.9% from the -0.7% first calculated by ONS.

Both industrial and manufacturing production fell back by 0.9% in terms of quarterly rates of change.

In terms of monthly rates of change, output in manufacturing only fell by 0.2% on the month, while that in the mining industries diminished by 2.2% (oil: -2.1%). Electricity output was 2.2% lower than in October and that of water supply companies decreased by another 0.1%.

Seven manufacturing industries sectors fell with six rising versus October, ONS has explained. The largest contributions to the month on month fall in manufacturing output were the manufacture of basic metals and metal products industries, which fell by 2.4%, followed by the manufacture of wood and paper products, which fell by 2.5%, and the manufacture of chemical and chemical products which fell by 2.7%. In contrast, the manufacture of transport equipment industries rose by 2.9% in November 2011 compared with October 2011.

Commenting on the data economists at Barclays Capital are saying that, “(…) November's unusually warmer weather appears to have had a significant negative effect on energy demand.

With November seeing another monthly fall in industrial production, the data so far indicate that the sector is set for a very poor performance in Q4 - a view supported by surveys. Currently, we expect industrial production to have fallen by 0.6% quarter-on-quarter in Q4 but today's data suggest the drop could be larger. Indeed, taken on their own today's data imply GDP might have contracted by 0.1% quarter-on-quarter in Q4 as opposed to our current forecast of zero growth. When the construction output data for November are released (tomorrow), we will revisit our Q4 GDP forecast.”

AB

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