OFFICIAL data published yesterday revealed slower than expected industrial growth in the UK, with the 0.3 per cent growth for March significantly below the 0.8 per cent expected by economists.
The figures chimed with the gloomy estimate of 0.5 per cent first-quarter growth for the economy as a whole, fueling fears that the economic recovery could be flagging. Industrial production grew just 0.2 per cent in the first-quarter.
“The most likely reason the market got it wrong was that the oil and gas component failed to bounce back as maintenance shutdowns in the fields continued longer than expected,” explained ING’s James Knightley.
Oil and gas extraction slightly recovered from its February dip, up 0.6 per cent, after the previous month’s 7.4 per cent fall.
Manufacturing grew just 0.2 per cent, after official data showed a shock stagnation in the factory sector for February.
“Wednesday’s trade figures revealed that goods exports grew very strongly in the first-quarter, so today’s weak figure for manufacturing suggests that domestic demand was exceptionally weak,” said Nida Ali of the Ernst and Young Item Club yesterday.
“This is a genuine cause for concern and adds to the uncertainty regarding the outlook.”
Compared to the previous year, however, manufacturing was still up by 2.7 per cent. The factory sector has now recorded 14 straight annualised increases in production. However, the month-to-month slowdown has some economists fearing that the manufacturing boom may not prove to be long lasting.
The pound dropped by over half a percentage point, from above $1.635 to touch $1.625 in morning trading, after the publication of the data.
The downbeat announcement was echoed across the channel in the Eurozone, where industrial production actually shrank in March, down by 0.2 per cent.