Industrial production fell 0.7 per cent month-on-month in February, confounding analysts’ expectations of a slight increase following the 0.4 per cent decline in January. The annual rise to February was 2.8 per cent, considerably lower than the forecast of 3.7 per cent.Meanwhile, manufacturing output also came in 0.1 per cent lower than January, compared to forecasts of a 0.3 per cent rise, and output in the construction industry also fell on the back of a reduction in infrastructure projects and fewer new house starts.In addition, the ONS said the UK trade deficit stood at its widest since September 2016, with the global goods trade balance coming in at minus £12.461 billion, against expectations of minus £10.9 billion. But stripping out erratic items such as ships, silver, aircraft and precious stones, the ONS said the trade deficit shrunk to £2.5 billion in February from £3 billion in January.

Warm weather reduces energy consumption

Kate Davies, ONS senior statistician, said, “While manufacturing was broadly flat in February, unseasonably warm weather reduced gas and electricity use, pulling down overall production.“The overall trade deficit worsened, but, excluding erratic items, the picture improved, as imports fell more than exports.“There were small falls across a range of construction sub sectors for the second month running, following a record performance for the industry at the end of 2016.”

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Slowdown in GDP

Howard Archer, chief UK and European economist at IHS Markit, said the ONS data pointed to a slowdown in GDP. “A disappointing package of data for the UK economy which fuels suspicion that GDP growth slowed markedly, largely due to consumers becoming more cautious.“We suspect UK GDP growth in the first quarter of 2017 slowed to 0.4 per cent quarter-on-quarter from 0.7 per cent quarter-on-quarter in the fourth quarter of 2016 – this would be the weakest growth rate since the first quarter of 2016.“Industrial production and (especially) construction output fell back appreciably in February while the trade deficit widened, admittedly partly due to erratic items lifting imports.“There was some limited, much needed relief on the prices front as prices of imported traded goods dipped 0.9 per cent month-on-month in February as sterling was modestly firmer and oil and commodity prices came off their highs. Even so, import prices were up 9.9 per cent year-on-year.”Samuel Tombs, chief UK economist at Pantheon Macroeconomics, added that production “likely will continue to surprise on the downside”.He added, “The average temperature was even further above its long-run average in March than in February, so output in the energy supply sector likely fell further in March.“Despite this, quarter-on-quarter growth in industrial production likely picked up to about 0.7 per cent in the first quarter of 2017, from 0.4 per cent in the last quarter of 2016. Even so, it is clear that industry does not have the momentum required to offset the consumer-led slowdown in the services sector this year.”For related news and features, visit our Enterprise section.Access hundreds of global services and suppliers in our Online Directory  Get access to our free Global Mobility Toolkit

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