Industrial production in surprise fall

City A.M. Reporter
The UK economy made a poor start to the third quarter in July, with industrial production falling unexpectedly due to a big drop in oil and gas extraction which outweighed a modest rise in manufacturing, new data shows.

The figures cast doubt on whether the economy will find its stride again after nine months of almost zero growth and a darkening international outlook that has tipped the Bank of England towards considering further monetary stimulus.

The Office for National Statistics said industrial output shrank by 0.2 per cent in July after a flat reading in June, below analysts' forecasts for another month of stagnation.

There was little reaction to the data, which confirmed economists' downbeat views on UK economic prospects.

"This undermines hopes that industrial production will see a decent rebound in the third quarter after plunging by 1.6 per cent in the second quarter," said Howard Archer, chief UK economist at IHS Global Insight.

The fall in output was mainly due to a 1.5 per cent drop in oil and gas production, which the ONS said was due to unusually prolonged maintenance on North Sea Oil rigs.

"Rigs are getting older so maintenance could be taking longer," an ONS statistician said.

These weaker oil and gas figures helped to offset a 0.1 per cent rise in manufacturing output, which was a shade better than economists had forecast and up from a 0.4 percent fall in June.

But there were no revisions to the June data that could alter the mediocre 0.2 per cent GDP growth recorded in the second quarter.

The ONS said 7 of the 13 manufacturing sub-sectors recorded growth in July, led by electrical and optical equipment, refined fuels and food, drink and tobacco.