U.K. industrial production increased for the first time in three months in January as the expansion in manufacturing offset a sharp reduction in oil and gas extraction.
Industrial output grew 0.3 percent on a monthly basis, reversing December’s 1.1 percent decline, the Office for National Statistics reported Wednesday.
The increase was the first in three months and the fastest in five months. However, the pace of growth was slightly slower than an expected 0.4 percent increase.
Overall production growth was underpinned by a 0.7 percent rise in manufacturing output, the ONS said. Manufacturing expanded in January following three consecutive monthly declines. Economists had forecast 0.2 percent growth after a 0.3 percent fall in December.
On the other hand, oil and gas extraction logged the biggest monthly fall since June 2014. Output slid 6.3 percent in January.
While 2016 started on a slightly better note, near-term prospects don’t look great, with the manufacturing sector dealing with subdued global growth and North Sea oil production hit by low oil prices, Scott Bowman at Capital Economics, said.
June’s referendum on UK membership of the EU adds to the uncertain outlook for UK manufacturers as increased caution in the run up to the referendum could lead to softer demand for capital goods and big-ticket consumer goods, IHS Global Insight economist Howard Archer noted.
The Purchasing Managers’ survey showed that the manufacturing sector expanded at the slowest pace in nearly three years in February. Output growth eased notably as incoming new business showed little improvement.
On a yearly basis, total production advanced 0.2 percent, offsetting December’s 0.2 percent drop. Meanwhile, manufacturing output fell 0.1 percent, but slower than a 1.7 percent decrease posted in December.
Economists had forecast total output to remain flat and manufacturing to drop 0.7 percent.
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