LONDON (Reuters) - British industrial output rose almost twice as fast as expected in May, taking its annual rate of growth to the highest in 10 years despite heavy downward revisions to April’s figures, official data showed Thursday.
The figures support survey evidence that a competitive exchange rate is helping manufacturers recover from last year’s deep recession, and reinforce the view that April’s fall in output was not the start of a new downward trend.
Nonetheless, economists were doubtful that the 0.7 percent monthly growth which the Office for National Statistics reported for May could be sustained into the third quarter, given hints that the rebound in output was starting to slow.
Year-on-year, industrial output rose 2.6 percent in May, up from 1.0 percent in April — the highest since June 2000 — and for the three months to May industrial output grew at its strongest pace since September 1988.
“It’s going to require an absolute collapse in June to prevent this providing a very robust addition to Q2 GDP so it’s a pretty good outcome,” said BNP Paribas economist Alan Clarke.
“The bad news is the pick-up has been consistent with (earlier strong) upstream indicators, and those indicators are now falling off a cliff. It basically suggests this sort of pace of growth is probably going to fall away later in the year.”
June data from a survey of purchasing managers showed almost no growth in export orders and the lowest rate of order growth overall since November last year.
After Thursday’s data, the National Institute of Economic and Social Research estimated that GDP rose 0.7 percent in the second quarter, more than double the 0.3 percent seen in Q1, and upwardly revised its estimate for the three months to May to 0.9 percent from 0.6 percent.
May’s industrial output growth marked an especially sharp rebound from the decline recorded for April, which the ONS revised down to 0.7 percent, almost double the 0.4 percent fall first estimated.
The ONS said this revision was due to a combination of late data, seasonal adjustment and an annual re-weighting of industry subsectors. Previous months’ data had also been revised, but the ONS said the changes were not significant enough to affect first quarter GDP data, a final estimate of which is due on July 12.
UK financial markets were little changed after the data which came a few hours before the Bank of England made a widely expected decision to leave interest rates on hold at a record low of 0.5 percent.
The narrower measure of manufacturing output — which excludes resource extraction and utilities — rose by 0.3 percent on the month, in line with forecasts and up from a 0.8 percent contraction in April.
This rebound was driven by increased production of electrical and optical equipment, basic metals and metal products.
On the year, manufacturing output was up 4.3 percent, its biggest annual increase since December 1994.
Editing by Toby Chopra