Industrial output rebounds, dampens recession fears

LONDON Thu Feb 9, 2012 3:05pm GMT

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LONDON (Reuters) - British industrial output recovered more than forecast in December as manufacturers ramped up production, further dampening fears of recession.

The rebound from the slump in the previous two months also supports views that the Bank of England will inject only 50 billion pounds into the economy rather than the 75 billion pounds of stimulus it opted for in October.

Industrial production - which accounts for around 15 percent of the British economy - grew 0.5 percent on the month, the Office for National Statistics said, against forecasts for a 0.2 percent 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 percent 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 percent decline in GDP.

The Bank of England is widely expected to announce a 50 billion-pound expansion of their quantitative easing programme, after earlier expectations of as much as 75 billion pounds 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.

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