U.K. industrial production
unexpectedly fell in January as factory output slumped, fueling
concerns that Britain may slip into a triple-dip recession.
Production dropped 1.2 percent from December, when it
jumped 1.1 percent, the Office for National Statistics said
today in London. The median forecast in a Bloomberg News survey
of 29 economists was for a 0.1 percent increase. Manufacturing
declined 1.5 percent. The pound fell.
As manufacturers battle a continued slump in the euro area,
the U.K.’s biggest trading partner, as well as lackluster demand
at home, today’s data have fueled concern the economy will fall
into its third recession in five years. The National Institute
of Economic and Social Research estimated that the economy
shrank 0.1 percent in the three months through February.
“A dire set of U.K. data,” said Ross Walker, an economist
at Royal Bank of Scotland Group Plc in London. It leaves a
“decline in first-quarter gross domestic product looking more
likely than not. Sustainable recovery and macroeconomic
rebalancing feel as distant as ever.”
The drop in manufacturing output compared with economists’
forecast for an unchanged reading. The statistics office said
respondents to the survey didn’t cite heavy snowfalls that month
for the slump. Nida Ali, economic adviser to the Ernst & Young
ITEM Club, said it may partly reflect the impact of the
“sharp” increase in December.
The pound dropped to as low as $1.4832 against the dollar,
the weakest since June 2010, and was trading at $1.4868 as of
2:40 p.m. in London, down 0.3 percent on the day. Government
bonds rose, pushing the 10-year gilt yield down five basis
points to 1.96 percent.
“It is quite early in the flow of first-quarter data, but
the data so far suggest that first-quarter growth may well be
negative, or at best flat,” said Michael Saunders, an economist
at Citigroup Inc. in London.
In its estimate of gross domestic product, NIESR said its
figures suggest that the economy “continued to flatline in the
first two months of this year.”
Today’s production data showed that mining and quarrying
fell 2.4 percent in January from December, while electricity and
gas rose 1.2 percent. Oil and gas dropped 4.3 percent because of
the closing of the Schiehallion platform, operated by BP Plc. (BP/)
The ONS said the suspension will continue for four to five years
as a new production and loading vessel is built. Oil and gas
output also plunged in September and October 2012 when the
Buzzard platform in the North Sea was temporarily shut.
Bank of England policy makers held their bond-purchase
program at 375 billion pounds ($558 billion) last week as
officials debated more radical measures to revive growth. In
February, policy makers said they “stand ready” to increase
quantitative easing to support the recovery.
With the incoming governor, Mark Carney, spurring a debate
on the BOE’s remit, Chancellor of the Exchequer George Osborne
has said he will consider the bank’s 2 percent inflation target
in his budget this month as he does every year.
Carney, who replaces Mervyn King in July, met the U.K.
Treasury’s top civil servant, Nicholas Macpherson, to discuss
possible changes to Britain’s monetary policy making, said a
person with knowledge of the talks. They discussed the options
in Ottawa last week, according to the person, who declined to be
identified because the conversation was private.
Manufacturers may get some support this year from the
weakness of the pound and a boost to export competitiveness.
Sterling is the second-worst performer after the yen this year
among 10 developed-market currencies, according to Bloomberg
Correlation-Weighted Indexes. It’s fallen about 8 percent
against the euro and 8.5 percent versus the dollar in that
Birmingham-based IMI Plc (IMI), a maker of fluid controls and
retail store displays, has said that while the “global macro-
economic outlook remains mixed,” it expects to benefit from
growth in emerging markets this year.
In a separate report today, the ONS said the trade deficit
on goods narrowed to 8.2 billion pounds in January from 8.74
billion pounds the previous month. Economists had forecast that
the would widen to 8.95 billion pounds. Exports fell 3.5 percent
and imports declined 4.2 percent. Imports of oil dropped by
about 1 billion pounds, the most since August 2008, though the
ONS said this data can be volatile.
The trade balance on services was at 5.83 billion pounds in
January, leaving the total trade gap at 2.36 billion pounds.
Also today, the Royal Institution of Chartered Surveyors
said its index of U.K. house prices fell to minus 6 in February
from minus 4 in January. While the value index declined, RICS
said expectations for both sales and prices improved.
The Frankfurt-based central bank increased provisions for
general risks by 6.7 billion euros ($8.7 billion) to 14.4
billion euros, it said today when releasing its 2012 annual
report. Due to higher interest income, the Bundesbank’s profit
rose to 664 million euros from 643 million euros in 2011. The
increase in provisions stems from the ECB’s enhanced support of
the financial sector over the course of the year, the Bundesbank
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U.K. Industrial Output Unexpectedly Falls as Oil Platform Halts – Bloomberg