More forecast smashing UK figures as industrial output returns decisively to growth

Today's excellent UK industrial production figures have added to the trend of forecast-beating results for the economy.

In the second quarter of the year, production output rose in line with expectations at 0.6 per cent growth, driven primarily by 0.7 per cent growth in manufacturing output. The Office for National Statistics (ONS) says this has no impact on the previously published second quarter GDP estimate of 0.6 per cent.

In addition to a strong manufacturing increase, quarterly growth was also driven by a 1.4 per cent increase in mining and quarrying and a 2.3 per cent increase in the water, sewerage and waste management sectors. These rises were partially offset by a fall of 2.4 per cent in the electricity, gas, steam and air conditioning sector.

Where the figures smashed expectations, however, was growth in the year to June. Compared to the year before, production output in June 2013 increased by 1.2 per cent. This follows a 4.3 per cent annual fall in the previous month, and beat analysts' expectations of a 0.6 per cent rise.

This growth was driven primarily by a 2.0 per cent annual rise in manufacturing output, following a 2.9 per cent fall in May. Analysts had expected this to increase by 0.9 per cent.

Other key drivers included a 7.8 per cent increase in water supply, sewerage and waste management, partially offset by a 4.4 per cent fall in mining and quarrying, and a 3.3 per cent fall in electricity, gas steam and air conditioning.

Compared to May 2013, industrial production was up 1.1 per cent and manufacturing production rose 1.9 per cent.

The ONS says industrial production contributed around 15 per cent to UK GDP in the first quarter of the year.

But David Kern, chief economist at the British Chambers of Commerce, said it's important not to get complacent.

The level of UK output is more than 3% below its pre-recession peak in 2008, and the manufacturing sector still faces major challenges over the months ahead. The government must do more to refocus its priorities towards policies that will enable businesses to drive the recovery. While recent figures support our view that more QE is unnecessary, businesses need a stable environment with reassurance that interest rates will remain at very low levels for the foreseeable future.