Tags: UK | Manufacturing | economy | factory

U.K. Manufacturing Unexpectedly Drops for Second Month

Thursday, 05 April 2012 09:30 AM

U.K. manufacturing output unexpectedly declined for a second month in February, indicating the economy’s return to growth may be uneven.

Factory output fell 1 percent from January, the most since April last year, the Office for National Statistics said today in London. The median forecast of 24 economists in a Bloomberg News survey was for an increase of 0.1 percent. Manufacturing, which accounts for 10 percent of the economy, was revised to a 0.3 percent decline in January from a 0.1 percent increase.

Reports this week showed expansion in services, manufacturing and construction accelerated in March, suggesting the economy probably returned to growth in the first quarter. Still, the British Chambers of Commerce said the recovery remains “weak.” The Bank of England maintained emergency stimulus for the economy at a meeting today.

“The U.K. recovery is not to be taken for granted,” said Blerina Uruci, an economist at Barclays in London. “We maintain our view that the economy will remain fragile during the first half of the year before gaining strength during the second half.”

The pound fell more than 0.4 percent against the dollar after the report. It traded at $1.5836 as of 11:42 a.m. in London. European stocks fell for a third day, with the Stoxx Europe 600 Index down 0.7 percent. The euro weakened.

German Output

Germany, Europe’s largest economy and one of the U.K.’s biggest trading partners, said industrial output fell more than economists forecast in February as cold weather kept workers off construction sites. Production decreased 1.3 percent from January, when it rose 1.2 percent, the Economy Ministry in Berlin said today. Economists forecast a drop of 0.5 percent.

“It was a freezing February, so a drop is a one-off effect,” said Alexander Koch, an economist at UniCredit Group in Munich. “Overall, the German economy is in good shape and we expect a gradual strengthening for the rest of the year.”

Germany will post growth of 0.6 percent this year even as the euro-area economy contracts 0.3 percent, according to the European Commission. German companies have relied on faster- growing markets like Asia to bolster sales as European governments from Spain to France cut spending amid the sovereign debt crisis.

Myanmar, once the world’s largest rice exporter and one of Asia’s last untapped frontier markets, is set to re-engage with the global economy in a boost to growth in the region.

Secretary of State Hillary Clinton said yesterday the U.S. will selectively lift restrictions on investment in Myanmar, after this month’s elections allowed democracy advocate Aung San Suu Kyi to win a seat in parliament.

China Slowdown

Myanmar’s emergence comes as its neighbors grapple with slowing growth in China and the European debt crisis. A Chinese services industry index showed slower expansion in March.

In the U.S., initial jobless claims probably fell 4,000 in the week to March 31 to 355,000, according to the median forecast of economists in a Bloomberg survey ahead of a report today.

Bank of England policy makers maintained their asset- purchase target at 325 billion pounds ($517 billion) and kept their benchmark interest rate at a record low of 0.5 percent.

Severfield-Rowen Plc, the supplier of structural steelwork to Heathrow Airport and the Shard skyscraper in London, said March 20 the U.K. has “limited growth prospects.”

U.K. Growth Outlook

U.K. Chancellor of the Exchequer George Osborne forecast on March 21 that the economy will grow 0.8 percent this year and 2 percent in 2013.

Within U.K. manufacturing, nine sub-sectors declined in February from January, three rose and one was unchanged. The decline was led by transport equipment, rubber and plastic products, and textiles. From a year earlier, factory output fell 1.4 percent in February.

Overall industrial output, which accounts for about 15 percent of gross domestic product, rose 0.4 percent in February from January, matching economists’ estimates, and was down 2.3 percent from a year earlier. The main risers were mining and quarrying, oil and gas extraction, and utilities such as electricity and water.

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Thursday, 05 April 2012 09:30 AM
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