UK industrial output in surprise fall

Looking into a factory with people at work
Image caption Manufacturing output fell sharply in August

UK industrial production fell unexpectedly in August, showing its biggest decline for nearly a year, according to figures from the Office for National Statistics (ONS).

Industrial output decreased by 1.1% month-on-month, surprising analysts, who had expected a 0.4% rise.

The news had an impact on the pound, which dropped 0.7% against the dollar.

The biggest factor in the decline was a big fall in manufacturing output, which was 1.2% down on July levels.

It was the biggest overall drop in output since September 2012.

At the same time, the ONS published figures showing that the UK trade deficit was largely unchanged in August.

The gap between imports and exports for the month was estimated at £3.3bn, compared with £3.4bn in July.

The decrease in UK manufacturing output was led by companies making pharmaceutical products, electronics, food and beverages.

But other sectors also contributed to the surprise fall in overall output, with the oil and gas industry also underperforming.

Private-sector surveys of production have been less downbeat. Last week, the Markit/CIPS Purchasing Managers' Index (PMI) for September indicated that UK manufacturing had grown for the sixth consecutive month.

'Difficult to explain'

Lee Hopley, chief economist at manufacturers' organisation EEF, described the latest ONS figures as "a mixed bag of data which breaks the run of consistently upbeat indicators in recent months".

She added: "Whilst August unwound some of the gains in June and July, the declines were particularly concentrated in a few sectors, namely food, pharmaceuticals and electronics.

"However, the trade news was a little more positive, with exports edging higher, thanks to gains in markets outside Europe.

"Despite this monthly setback on production, manufacturing should make a positive contribution to third-quarter GDP growth and other business surveys seem to align behind a continuation of this trend through the final months of the year."

However, Jeremy Cook, chief economist at currency brokers World First, said the figures were "a further sign that the UK's economic revival cannot be guaranteed".

"While the IMF may have sung the UK's praises [on Tuesday], today's number shows that the broad-based recovery that so many have been hailing has significant tasks attached," he said.

"The divergence between the recent, multi-year highs on PMIs and the official data is worrying and a little difficult to explain. Could businesses be overly exuberant without cause?"

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