UK industrial production falls on oil and gas as manufacturing output shows modest growth

 
James Nickerson
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Oil and gas production fell by 5.8 per cent (Source: Getty)

UK industrial output has unexpectedly fallen by 0.4 per cent in June, led by oil and gas output falling.

Industrial output fell compared to an increase of 0.3 per cent in May and compared to expectations of a 0.1 per cent rise in June, according to figures from the Office of National Statistics.

The fall in production is in part due to a slowdown in oil and gas production as “maintenance in a number of terminals hampered production,” the ONS said.

Read more: Oil and gas fires up industrial production - but manufacturing output slides

The largest downward contribution was the extraction of crude petroleum and natural gas, which decreased by 5.8 per cent.

However, output is estimated to have increased by 1.5 per cent in June this year compared to last year.

The data comes after production output increased in April and May, while manufacturing output contracted. In June, these trends were reversed.

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Manufacturing output increased by 0.2 per cent in June compared to May, but manufacturers have struggled so far this year because of weak demand from Europe and a strong pound.

Chris Williamson, chief economist at research firm Markit, said that despite the rise in manufacturing output in June the outlook remained subdued:

The wider measure of industrial production fell 0.4 per cent in June after rising 0.3 per cent in May, but increased 0.7 per cent in the second quarter on the back of what looks likely to have been a temporary upturn in oil and gas production.

In a reminder of how disappointing the ‘recoveries’ have been in the industrial sectors, total industrial production and manufacturing output remain some 9.2 per cent and 4.8 per cent respectively below the economy’s pre-recession peak seen at the start of 2008.

Also commenting on the figures, David Kern, chief economist at the British Chambers of Commerce, said the economy will remain reliant on the services sector:

Although manufacturing output returned to modest growth in June, after declining in May, the sector’s overall performance remains mediocre. While there have been modest improvements in the Eurozone, which will help exporters in coming months, progress will be difficult because of the recent strength of the sterling against the euro. Any premature action on interest rates is likely to make these problems worse.

The UK economy will remain dependent on its dynamic and competitive services sector but manufacturing remains a vital sector for exports, innovation and productivity.

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