UK industrial output shrinks unexpectedly in Feb, adding to signs of slowdown

Manufacturing production rose 2.1% in the three months to February, unchanged from January, and the strongest 3-month advance since May 2010 with an important positive contribution from the transport sector.

In monthly terms, production shrank 0.7% in February-much more than expected by analysts polled by The Wall Street Journal, who predicted a fall of 0.1%. Moreover, the visible trade deficit widened to a 5-month high.

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.

Sterling slid to a one-week low against the dollar after industrial output dipped 0.7 percent in February, worse than all forecasts in a Reuters poll of economists, which had pointed to a 0.2 percent increase.

The move was largely caused by a fall in electricity and gas demand driven by unseasonably warm weather, while manufacturing also eased back by 0.1% in February compared to a contraction of 1% in January. Factory output declined by 0.1%, against analysts' expectations of 0.3% growth.

On a year-on-year basis, production rose 3.3%, falling short of forecast for a 3.9% gain, but beating the previous month's 2.6% reading. This took the year-on-year rate to just 0.5%, down from 2.3% in January. The shortfall was forecast to narrow to GBP 10.9 billion.

Separate figures showed Britain's goods trade deficit unexpectedly hit a five-month high in February and January's deficit was revised up too, the Office for National Statistics said. The increase reflects a GBP 0.4 billion decrease in exports and a GBP 0.3 billion increase in imports.

"Today's deluge of United Kingdom economic data was fairly disappointing and adds to the evidence that the economy has lost some momentum during Q1", said Ruth Gregory, economist at Capital Economics. The figures suggest first quarter growth could be dampened by the larger trade deficit in the first two months of the year.

The economist suspects UK GDP growth in the first quarter of 2017 slowed to 0.4 percent.

  • Zachary Reyes