UK industrial output in smaller-than-expected rise

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The UK's industrial and manufacturing output moved back into growth in June after falling by 1.3% in May.

But the rise, a smaller-than-expected 0.3%, indicates once again that the economy is still being mostly dominated by the services sector.

The Office for National Statistics figures also showed that over 12 months, industrial output was up 1.2%.

Last week, a survey by Markit showed manufacturing grew at its slowest pace in a year in July.

Strong pound

"The absence of a bigger rebound from May's 1.3% monthly decline appears to have raised further questions about whether the UK manufacturing sector could be headed to a more moderate growth path," said a note from Investec Economics.

"Such concerns were emphasised by last week's July manufacturing PMI which, whilst still firmly in expansionary territory, printed its softest reading in a year at 55.4."

Factory output is still 7.4 % below its 2008 peak, but services sector output is well above its pre-crisis peak.

Analysts say the strong pound could be holding back UK manufacturing.

"Admittedly, the ongoing strength of sterling presents an obstacle to export sales, as well as domestic firms competing with imports," said Martin Beck, senior economic adviser to the Ernst & Young Item Club.

"But the strength of domestic demand should help in part to compensate for the weakness overseas. So the economy's expansion will hopefully see more support from industry over the second half of the year."

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