UK manufacturing output falls unexpectedly in October

British manufacturing output fell 0.4 per cent in October.
British manufacturing output fell 0.4 per cent in October. PHOTO: BLOOMBERG

LONDON (REUTERS) - British manufacturing output fell unexpectedly in October, denting hopes the sector might soon help to drive the country's economy towards a more balanced recovery, data showed on Tuesday.

Manufacturing output fell 0.4 per cent on the month in October, against expectations for it to stagnate following a 0.9 per cent surge in September, the Office for National Statistics said on Tuesday.

Britain had the fastest-growing advanced economy in the world last year and is likely to be at the head of the pack again this year. But it has relied heavily on domestically focused services for growth, frustrating hopes for a better-balanced recovery.

Manufacturing has so far failed to contribute positively to economic growth this year, impeded by a slowing global economy. Tuesday's figures do little to counter some surveys that have shown the sector could be heading for a steeper downturn.

Improved North Sea oil and gas extraction helped wider industrial production edge up in October. Economists said this kept the economy on track for quarterly growth of around 0.6 per cent in the last months of the year, up slightly from the third quarter.

But some expressed reservations about the balance of the upturn. "While we expect the overall economic recovery to pick up the pace again in coming quarters, a sustained rebalancing towards production and exports still seems a distant prospect," Ruth Miller, economist at Capital Economics, said.

An industry survey published on Monday pointed to a weaker outlook for British manufacturing next year, with output and new orders falling to levels not seen since 2009.

While markets showed little reaction to Tuesday's data, sterling sank back below $1.50 on Tuesday, hurt by a bearish round of forecasts for the pound from several big banks.

Compared with October 2014, manufacturing output was 0.1 per cent lower, against expectations for a 0.1 per cent rise.

Industrial output increased 0.1 per cent on the month as expected, while on the year it was up 1.7 per cent, beating a Reuters poll forecast for a 1.2 per cent upswing.

But industrial production is still almost 9 per cent below its pre-downturn peak in early 2008. Manufacturing output is around 6.1 per cent below its peak.

The ONS said other manufacturing and repair - notably the repair of aircraft - was the biggest downward driver on industrial production in October.

Consumer spending has been a key driver of the economy over the past few years, although a survey from the British Retail Consortium published earlier on Tuesday showed retail spending grew at the weakest pace for any November since 2011.

And mortgage lender Halifax said British house prices fell last month, but a growing shortage of available properties is likely to keep pressure on the market.

The data release comes shortly before the Bank of England announces its latest interest rate decision.

The Monetary Policy Committee is expected to leave borrowing costs unchanged at 0.5 per cent but most economists forecast a rate hike in the second quarter of next year.