UK industrial output unexpectedly falls on oil and gas

LONDON (BLOOMBERG) - Industrial production in the United Kingdom unexpectedly fell in June as North Sea producers cut output for the first time in three months.

Total production fell 0.4 per cent from May, when it rose a downwardly revised 0.3 per cent, the Office for National Statistics said in London on Thursday (Aug 6). An increase of 0.1 percent was expected by economists in a Bloomberg survey. Factory output increased a larger-than-forecast 0.2 per cent.

The figures come as the Bank of England prepares to release its latest interest-rate decision together with quarterly forecasts. While some policy makers are expected to push for an increase in borrowing costs to counter growing wage pressures, recent surveys suggest the economy lost some momentum at the start of the third quarter.

Purchasing managers indexes published this week showed manufacturing remains "near stagnant" while services slipped slightly last month. The economy grew at a 0.6 per cent quarterly rate in July, compared with 0.7 per cent growth in the second quarter, according to Markit Economics.

The pound registered little reaction to the industrial production data and was trading at US$1.5603 as of 9:33am London time, little changed on the day.

In the second quarter, industrial output rose 0.7 per cent instead of the 1 per cent estimated in gross domestic product data last month. The revision had a negligible impact of less than 0.1 percentage point on gross domestic product for the period. Manufacturing declined an unrevised 0.3 per cent.

In June, the fall in industrial output was driven by a 5.8 per cent drop in oil and gas production, the biggest decline since January last year. It followed three months of gains and was partly due to maintenance that halved production at the Sullom Voe oil field.

Manufacturing rose in seven out of 13 sub sectors, with basic metals and metal products making the biggest contribution. This was largely due to a 31 per cent increase in production of weapons and ammunition.