By Jon Sindreu and Jason Douglas

 

LONDON--The decline in U.K. industrial production accelerated in December, official figures showed Wednesday, denting hopes for a tentative recovery in the sector this year.

Industrial output dropped 1.1% on the month, the Office for National Statistics said, after falling 0.8% in November. Analysts polled by The Wall Street Journal last week expected a fall of 0.2%.

A large part of the dip came from mining and quarrying, chiefly due to a large decrease in the extraction of crude oil and natural gas. The extraction industry in the North Sea struggled for most of 2015, due to steep falls in oil prices in global markets.

Factories in the U.K. also failed to recover--manufacturing output fell 0.2% in December, adding up to a 1% fall for the whole of 2015.

Government statisticians said, however, that it wasn't necessary to revise overall U.K. economic growth during the final quarter of last year because of the weak industrial output numbers. According to the preliminary reading of U.K. gross domestic product, released last month, the economy expanded 0.5% between October and December--faster than the third quarter's 0.4% rate of growth.

Still, Wednesday's data is a bad omen for industries into 2016 after a rough second half of last year.

In 2015, a rise in the value of sterling against other major currencies--particularly the euro--made it harder to sell goods abroad. Indeed, Britain's trade deficit in goods compared with the European Union was the widest on record during the final quarter of 2015, government statisticians said Tuesday.

The pound has since weakened since the beginning of this year--in January it reached a one-year low compared with a basket of other major currencies, Bank of England data show--while the domestic economy remains relatively robust.

"Sterling's recent depreciation will ease pressure on manufacturers, but long lags imply this boost won't really be felt until the tail end of 2016," said Samuel Tombs, analyst at Pantheon Macroeconomics. "Accordingly, we think that industrial production will only manage to hold steady this year."

Weak economic readings have consistently driven investors to push back the date when they expect the Bank of England to start raising interest rates--currently pegged at a low of 0.5%. Market derivative instruments now price in a rise as late as mid-2019.

 

Write to Jon Sindreu at jon.sindreu@wsj.com and Jason Douglas at jason.douglas@wsj.com

 

(END) Dow Jones Newswires

February 10, 2016 05:15 ET (10:15 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.