Weak British output data triggers growth concerns

Industrial output falls by 0.7%, after shrinking 0.3% the previous month

LONDON: Britain’s industrial output fell more than anticipated in February, in a sign that the economic resilience seen after the Brexit referendum could be starting to crumble, official data showed Friday.

Industrial output contracted by 0.7% in February, after already shrinking 0.3% the previous month, the Office of National Statistics (ONS) calculated.

Analysts pencilled in a more modest decline of 0.2% for February.

Output in the energy sector contracted the most, the ONS said, as relatively warm temperatures in February led to “a decrease in domestic energy demand and, subsequently, gas and electricity production”. But declines were seen across all sectors, with the manufacturing output dipping by 0.1% month-on-month.

Analysts described the data as disappointing.

The numbers “fuel suspicion that GDP (gross domestic product) growth (has) slowed markedly, largely due to consumers becoming more cautious,” said IHS Markit economist Howard Archer.

“There is also evidence that some clients are reluctant to commit to major projects in an uncertain environment,” he added, as Britain begins a two-year process of leaving the European Union.

Looking ahead, economists expect Brexit-fuelled uncertainties and rising inflation caused by a weak pound and rising oil prices to crimp British growth, which was 1.8% in 2016.

Bank of England governor Mark Carney on Friday warned of the consequences for Britain’s crucial finance sector of leaving the EU without a deal, although he said he was optimistic an agreement could be reached. Others believe that the February data may be unusually pessimistic, as it was driven by volatile sectors.

“Despite the disappointing data in February, with temporary factors at play, we remain optimistic that we should see some bounce back,” said Ruth Gregory from Capital Economics.

Britain’s trade figures also came in worse than expected, with the deficit widening by £0.7 billion to £3.7 billion (4.3 billion euros, $4.6 billion) in February.

That is the UK’s widest trade deficit in five months.

Published in The Express Tribune, April 9^th, 2017.

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