May 9, 2013 / 8:36 AM / 6 years ago

UK March industrial output stronger than forecast as factories gain pace

LONDON (Reuters) - British industrial output rose more than expected in March as manufacturing gathered momentum, outweighing a fall in oil and gas production, official data showed on Thursday.

Employee Balzas Czimer install an engine into a Rolls Royce Ghost at the Rolls Royce Motor Cars factory at Goodwood near Chichester in southern England April 24, 2013. REUTERS/Luke MacGregor

Industrial output climbed 0.7 percent on the month in March after a downwardly revised increase of 0.9 percent in February, well above forecasts of a 0.2 percent rise, the Office for National Statistics said.

This left industrial output in the three months to March 0.2 percent higher compared with the previous quarter, exactly in line with what the ONS had estimated as part of its first-quarter gross domestic product calculations.

On an annual basis, industrial output was down 1.4 percent. That was the smallest drop since last August and better than forecasts for a 1.6 percent decline, as unusually cold weather boosted electricity generation.

Britain’s economy grew a stronger than expected 0.3 percent in the first three months of 2013, helping the country dodge recession.

A marked fall in industrial output - largely due to a big drop in oil and gas production because of maintenance - was the biggest factor behind a 0.3 percent fall in GDP in the last three months of 2012.

In the first three months of 2013, oil and gas output recovered some of the lost ground, with Thursday’s data showing output up 2.1 percent over the period compared with the final quarter of 2012.

However, in March alone the sub-sector posted a drop.

Industry overall - which makes up just 16 percent of Britain’s economy - made a negligible total contribution to first-quarter economic growth, which was largely driven by higher services output.

But Thursday’s figures showed that manufacturing - which some economists think is a better gauge of the underlying health of the broader industrial sector - grew by 1.1 percent from February, beating forecasts for a 0.3 percent rise.

The increase was driven by the production of metals, electronics and machinery.

The latest industrial data is likely to confirm widespread expectations of no extra stimulus from the Bank of England when it announces its monthly policy decision at 12:00 p.m.

Moreover, the outlook for manufacturing appears to be brightening further, as a survey of purchasing managers found that the sector almost returned to growth in April, easily surpassing forecasts.

Reporting by Olesya Dmitracova and David Milliken

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