November 6, 2012 / 9:48 AM / 5 years ago

Instant View - September industrial output falls short of forecasts

LONDON (Reuters) - British industrial output fell more than expected in September, data showed on Tuesday, reinforcing fears that Britain’s recovery will struggle to gather pace towards the end of the year.



”I think it’s very easy to be drawn into the -1.7 percent month on month as an absolute disaster, which I think is misleading because it reflects North Sea maintenance, a 20 percent drop in gas and oil extraction so I’d be loathed to read too much into that and they will probably be reversed in the next month or two.

”This month’s -1.7 percent will probably turn into a plus 1 to 2 percent a month or two down the road, so I wouldn’t read too much into that.

”I am less reassured by manufacturing, out by just 0.1 percent month on month. A lot lower than implied by the GDP data. And given where the PMIs surveys are, it’s probably reasonable and in actual fact, it could get worse from here.

“Overall it’s a gloomy report, it’s not the bloodbath that -1.7 percent suggests but it’s gloomy nonetheless.”

“It shows that the economy is still not firing on all cylinders.... It’s not going to be a straight line recovery and there will be bumps in the road.”

“We had various MPC members saying we can do more QE, it will push down government bond yields but will it help? And for a lot of them the conclusion was no. The effectiveness of QE is waning and that’s not going to change in light of these numbers.”


”Obviously it’s a lot weaker than expected.

”This is probably not going to have much of an impact on GDP in Q3 but it will have an impact on GDP in Q4.

”Industrial production does tend to be buffeted by mining and energy which is much more volatile. The big effect here is that it could push down on GDP for Q4.

”We’ve seen a substantial amount of weaker data this week, whether its PMI, BRC and Halifax figures or IP today.

”I think the recovery is continuing to look very fragile. I think it’s a very close call if the MPC chooses to do more stimulus on Thursday - we continue to think they won‘t.

“There is an increasing risk with every bit of weaker data we get that they might have to do more either this month or next month.”


”September’s UK industrial production figures supported the latest CIPS/Markit activity surveys in suggesting that the economic recovery is quickly losing momentum again.

”Admittedly, (the fall in industrial production) largely reflected a colossal 20 percent drop in output in the oil and gas sector, probably due to the later timing of annual maintenance.

”However, manufacturing output was broadly unchanged and so failed to recover any of August’ s 1.2 percent drop.

”Moreover, the activity balances of both the CIPS and CBI manufacturing surveys were very weak in October, pointing to further falls in output ahead.

“All in all, then, while the MPC may pause QE at its meeting later this week, if the economic data remain this weak then it may not be long before the Committee is forced to provide the economy with further stimulus.”


”These figures were disappointing. But there are two issues. The bounce in manufacturing was a lot less than what was implied by the quarterly GDP figure, and the oil and gas sector did worse than expected as well.

”I think we can expect a downward revision of the GDP figure. This isn’t particularly significant, though, as we were all surprised by the one per cent figure.

”More worrying is the effect this might have on fourth quarter GDP.

“As for the coming BOE decision, I think this will have very little effect. We’ve had a very strong suggestion from Mervyn King that it might be time to sit back and just analyse what’s going on rather than continue with QE.”




Manufacturing %MM +0.1 -1.2 (-1.1) 0.3

Manufacturing %YY -1.0 -1.2 (-1.2) -0.8

Industrial %MM -1.7 -0.5 (-0.5) -0.6

Industrial %YY -2.6 -1.0 (-1.2) -1.6


- Excluding holiday-affected June, biggest monthly drop in industrial production since August 2009.

- Biggest monthly fall in mining and quarrying since February 1974

- Biggest monthly fall in oil and gas extraction since records began in 1997

Reporting by Sven Egenter, Li-mei Hoang, Isla Binnie and Peter Schwartzstein

Our Standards:The Thomson Reuters Trust Principles.
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