UK industrial production shows slow growth

UK industrial production grew less than forecast in March as manufacturing barely rose and oil and gas output shrank.

Output rose 0.3 per cent, less than the 0.5 per cent gain predicted in a Bloomberg survey of economists, figures from the Office for National Statistics published on Wednesday show.

It followed a 0.2 per cent decline in February. Factories increased production by 0.1 per cent, also less than predicted.

Industrial production fell 0.4 per cent in the first quarter, unrevised from gross domestic product data last month.

It was the second consecutive quarterly decline. The figures will intensify concern about the lop-sidedness of the British economy at a time when its services powerhouse is showing signs of strain as the referendum of European Union membership looms.

Manufacturers have been hit hard by the global slowdown and surveys suggest their troubles are deepening.

A factory index published by Markit Economics this month showed the sector contracting for the first time in three years in April.

The pound fell after the data and was trading at $1.441 in London on Wednesday morning, down 0.2 per cent on the day.

Five of 13 manufacturing sectors saw output rise on the month, with the largest contribution coming from transport equipment.

Anecdotal evidence suggests car exports were behind the increase. The biggest downward contribution came from food products, beverages and tobacco.

Steel Output

Oil and gas extraction fell 0.1 per cent on the month, while the electricity and gas sector saw output rise 3.3 per cent.

The ONS attributed the gain to colder temperatures in March and the increased use of gas in electricity generation.

Industrial production fell 0.2 per cent from a year earlier, while manufacturing declined 1.9 per cent, the biggest annual drop since May 2013.

Basic iron and steel output fell by 37 per cent. The figures come as the Bank of England prepares to issue new forecasts on Thursday.

Policy makers are forecast to keep the benchmark rate at a record-low 0.5 per cent and traders are pricing in a 40 per cent chance of lower borrowing costs this year.

- Bloomberg