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UK August industrial output weaker than expected, trade deficit widens
October 7, 2016 / 8:39 AM / 10 months ago

UK August industrial output weaker than expected, trade deficit widens

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A worker attaches a connector to electrical wire on the factory floor of PP Control and Automation near Cannock, Britain, July 6, 2016.Phil Noble

LONDON, Oct 7 (Reuters) - British industrial output fell unexpectedly in August, partly due to oil field shutdowns, though there were some limited signs that the pound's fall since June's Brexit vote had boosted factory exports.

Britain's trade deficit also widened more than expected, jumping to 12.1 billion pounds in August from 9.5 billion pounds in July, smaller than first estimated, the Office for National Statistics said on Friday.

Industrial output fell 0.4 percent month-on-month in August after a 0.1 percent increase in July, the Office for National Statistics said. Economists polled by Reuters had expected it to edge up 0.1 percent.

The figures are likely to temper some of the optimism about how Britain's economy has fared since it voted to leave the European Union, although the Bank of England is likely to look through volatile monthly data when it decides whether to cut interest rates next month.

Output in manufacturing rose 0.2 percent following a 0.9 percent fall in July. Economists polled by Reuters had expected manufacturing output to increase 0.5 percent in July.

"Manufacturing output was up slightly in August with more cars built, with limited evidence suggesting the lower pound boosted exports," ONS statistician Kate Davies said.

Nevertheless, this was offset by a fall in oil and gas production, with field shutdowns contributing to the decline, she added.

Sterling fell to fresh 31-year low on Friday on fears of the consequences of a "hard" exit by Britain from the European Union following comments by French president Francois Hollande.

The pound's weakness has also pushed up prices paid by factories for imported materials and energy are also on the rise - something that will squeeze profit margins unless firms raise prices and boost inflation.

Looking at the three months to August as a whole, industrial output was 1.4 percent higher than at the same point a year ago, slowing from a 1.6 percent rate of growth seen in July.

A closely watched survey by financial data company Markit  

suggested British manufacturing staged one of its sharpest rebounds on record in August, and grew at a much faster pace than expected in September.

The strength of this week's Markit survey further dampened expectations that the Bank of England will again cut interest rates to a new record low before the end of the year.

Separate figures from the ONS showed Britain's goods trade deficit with European Union countries hit a record high 8.356 billion pounds in August, up more than a billion pounds from July.

Overall goods imports rose sharply, driven by imports of electrical machinery, cars and aircraft.

Reporting by Andy Bruce and David Milliken

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