UK in industrial output boost as trade deficit narrows
British industrial output recovered more than forecast in December as manufacturers ramped up production, further dampening fears of recession.
Meanwhile, Britain’s goods trade deficit narrowed to the smallest gap since February 2010.
The rebound from the slump in the previous two months also supports views that the Bank of England will inject only £50bn into the economy rather than the £75bn of stimulus it opted for in October.
Industrial production – which accounts for around 15 per cent of the British economy – grew 0.5 per cent on the month, the Office for National Statistics said, against forecasts for a 0.2 per cent rise.
The narrower reading of manufacturing output, which excludes utilities and oil and gas extraction, rose by 1.0 percent on the month in December versus forecasts for a 0.2 percent rise. On the year, manufacturing output was 0.8 percent higher.
However, the figures showed a 1.4 per cent drop in overall industrial production in the fourth quarter, a slightly bigger decline than originally assumed for the GDP growth figures.
The ONS said this would only have a minor downward impact on fourth-quarter growth number, which showed a 0.2 per cent decline in GDP.
The Bank of England is widely expected to announce a £50bn expansion of their quantitative easing programme, after earlier expectations of as much as £75bn in fresh stimulus have largely subsided in the wake of more upbeat economic news.
A strong run of closely watched business surveys last week has fuelled hopes that Britain will dodge recession early this year after contracting in the last quarter of 2011.
The manufacturing Purchasing Managers’ Index (PMI) showed that the sector gained momentum in January as orders rose for the first time in six months.
In a separate release, the ONS said that Britain’s goods trade deficit narrowed in December to 7.1 billion pounds – the smallest gap since February 2010 – from 8.9 billion pounds in November. Economists had forecast a gap of 8.6 billion pounds.
The overall trade deficit including services narrowed to just 1.1 billion pounds, the lowest since April 2003.