Hopes for Recovery in UK Industry Dented After Output Fell Again in Dec
10 February 2016 - 09:30PM
Dow Jones News
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)
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