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UK industrial production trounces expectations in December

Date: Thursday 09 Feb 2012

UK industrial production trounces expectations in December

Industrial production in the United Kingdom grew by 0.5% on the month (-3.3% on the year) during the month of December, according to the latest data from the Office for National Statistics.

The consensus estimate was for an increase of 0.2% (-3.0% on the year).

By sectors, and in terms of monthly rates of change, production rose by 1.0% in manufacturing (Consensus: 0.2%) and that of energy supplies by another 0.4%, but output from mining&quarrying fell by 2.1% while that from the water&waste management sector did so by another 0.1%.

However, in terms of quarterly rates of change, which helps to smooth out the monthly variations, industrial production fell 1.4% and that of manufacturing by 0.8%. The former is the largest contraction seen since the first quarter of 2009.

REVISIONS

The year-on-year rate of change in industrial production for the previous month was revised lower, to -3.6% from a preliminary estimate of -3.1%.

The month-on-month rate of change in manufacturing production for November has been revised up to -0.1% from the preliminary estimate of -0.2%.

COMMENTARY:

Commenting on the data after its release economists at Barclays Capital are pointing out that, “despite being stronger than market forecasts, the Q4 industrial production data were weaker than the ONS had factored into its preliminary estimate of Q4 GDP. Nevertheless, the ONS has indicated that, on their own, these data would not prompt a revision to the GDP estimate.

“Also, glossing over the monthly volatility in the data, it is worth bearing in mind that the quarterly growth rates reveal falling output across the board in the industrial sector. However, survey indicators suggest that the weakness in production activity probably reached its worst point at the end of last year (see chart). We expect industrial output to fall at a slower rate in Q1 and forecast industrial output to resume growth in Q3 of this year, albeit at a subdued pace.”

AB

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