Steep drop in hi-tech goods sector blamed for decline in monthly figure
Britain’s manufacturers cut production going into the new year,
according to official figures that showed a dip of 0.5% in output in
January compared with the previous month.
The fall in output contributed to an unexpected reverse in the
broader measure of industrial production, which fell month on month by
0.1%, against a 0.2% increase predicted by economists taking part in a
Reuters poll.
Sterling fell a cent against the dollar to $1.50 on the news that a
key measure of the British economy’s health was again looking
lacklustre. While the services sector has recovered to beat its previous
peak output, manufacturing and industrial production, which includes
the energy sector and mining, remain well below their peak.
In December, industrial production fell 0.2%, which the Office for
National Statistics blamed on oil rig maintenance in the North Sea. The
decline in January was due to a fall in factory output led by computer
electronics makers, who cut production by almost 10% in response to
falling orders.
The pound has tumbled against the dollar since last summer when it
peaked at $1.71. Most of the shift in the exchange rate has followed a
rush of funds into the US in response to rising expectations that the US
Federal Reserve will raise interest rates. However, against a
trade-weighted basket of currencies, sterling has risen to its highest
since 2008, up almost 5% so far this year, a development that affected
overseas sales in February.
Jameel Ahmad, chief market analyst at FXTM, said: “The industrial
production number coming in below expectations has softened some of the
optimism that UK economic momentum had gathered since the start of the
year. With the UK election looming, I do not personally think
sterling/dollar has bottomed out.”
A warmer winter and the decline in oil prices over the last eight
months have hit production in the energy sector, but January saw the oil
and gas sector bounce back with the largest contribution to growth. Oil
and gas output increased by 2.4% in January after a decrease of 3.1%
the previous month.
Chris Williamson, chief UK economist at financial data provider
Markit, said the decline in industrial production was driven by an
unusually severe plunge in the output of hi-tech equipment following a
6.5% rise in December.
He said: “The data are clearly volatile, and it would be dangerous to
read too much into the decline. Encouragingly, the less volatile
three-month trend showed manufacturing output growth picking up 0.4% in
January from 0.3% in December.
Annual figures showed a 2.6% rise in manufacturing in the three months to January compared with a year ago.
