UK industrial production increases less than forecast

United Kingdom Business Secretary, Vince Cable
| credits: www.telegraph.co.uk

United Kingdom industrial production rose less than economists forecast in June and the output estimate for the second quarter was revised lower, Bloomberg reports.

Production increased 0.3 per cent from May, when it fell 0.6 per cent, the Office for National Statistics said in London today.

The median forecast of 32 economists in a Bloomberg News survey was for an increase of 0.6 per cent. Output in the second quarter rose 0.3 per cent, below the 0.4 per cent estimate published in last month’s gross domestic product data.

The report adds to signs that parts of the recovery are softening, with manufacturers battling a stronger pound and strains in the euro area, Britain’s biggest trading partner.

“The last couple of months do hint at some cooling off in the near-term momentum,” said Alan Clarke, an economist at Scotiabank in London. “Euro-zone demand for our exports is still sluggish to it is hard to get too upbeat from here.”

The pound extended its decline against the dollar after the data were published and was 0.3 per cent weaker at $1.6842 at 10:11 a.m.

London time. Sterling has risen 11 per cent in the past 12 months, making it the best performer in a basket of 10 developed-nation currencies tracked by Bloomberg.

Bank of England officials start their two-day policy meeting today as they assess the economy’s ability to withstand higher interest rates. While all 47 economists in a Bloomberg News survey say the Monetary Policy Committee will leave the key rate at a record-low 0.5 per cent, some forecasters predict an increase will come as soon as November.

“It is clearly a very close call as to whether the Bank of England will raise interest rates at the end of this year or hold off until early 2015,” said Howard Archer, an economist at IHS Global Insight in London.

The statistics office said the revision to second-quarter production will have a “minimal” impact on the GDP estimate published on July 25. That showed the economy grew 0.8 per cent.

Within production, mining and quarrying dropped one per cent in June from the previous month, while oil and gas extraction fell 1.3 percent.

Today’s report also showed that manufacturing output rose 0.3 per cent in June from May, half the increase forecast by economists. From a year earlier, factory output increased 1.9 per cent, with total production up 1.2 per cent.