March 10, 2010 / 9:48 AM / 10 years ago

Instant view - UK Jan manufacturing output unexpectedly falls

LONDON (Reuters) - British manufacturing output unexpectedly fell in January at its sharpest monthly rate since last August, after a strong December and poor weather in the month, official data showed on Wednesday.


“Optimists will argue that some of the weakness in January could reflect weather disruptions to production, and that is certainly possible. And provided that the fall does reflect temporary factors, and reverses in February, production will still be on course to post modest positive growth in Q110 as a whole.

“But the risk is that at least part of January’s weakness reflects the soft underbelly of the economic recovery, and is another signal that GDP growth will struggle to pick up to around 3% y/y by the turn of the year, as the MPC expects.

“At the very least, today’s data mark an inauspicious start to 2010.”


“Despite the extreme weather conditions in January the fall in manufacturing output is much bigger than expected, and wipes out the gains made in December. This is also out of kilter with what the surveys reported, but the surveys are not good at picking these effects up.

“Analysis of previous cold snaps suggests that disruption caused by poor weather is usually followed by a period of catch up, with the net effect on output being negligible, and we expect that to be the case again this time around.

“The recovery in manufacturing has not been as weak as the output data suggests. Firms are destocking less than before, making a healthy contribution to Q4 GDP and probably to manufacturing output in Q4.

“As the stock cycle continues to turn, there will be further boosts to output. At the same time, strengthening export demand combined with weak sterling will be a key factor behind a gradual pick up in the manufacturing sector.”


“January’s UK industrial production figures put a bit of a dent in hopes that the economic recovery might have picked up a bit more speed in the first quarter of the year.

“With surveys like the CIPS/Markit report on manufacturing generally strengthening, some rebound in production in February seems very likely. Nonetheless, January’s poor platform means that even 0.5% monthly rises in both February and March would leave a quarterly gain similar to that in Q4. So industry now looks unlikely to drive any significant pick-up in GDP growth in


“What’s more, with the latest trade figures still showing few signs of any real boost from the lower pound, the outlook for the export-sensitive industrial sector remains pretty fragile.”


“UK industrial production was much weaker than expected, though this was heavily influenced by adverse weather.

“Snow will have physically obstructed workers at manufacturers and their end customers from getting to work. Similarly deliveries in and out of businesses will have been impeded.

“We believe this was a temporary blip and a sharp snapback is likely next month.”


“The figures are very disappointing. It is impossible to blame everything on the weather but it does seem to be having an impact.

“The only comforting feature with manufacturing is that all the surveys show the output trend to be positive, which gives us confidence that January’s official reading is a bit of a rogue number.”

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