LONDON (ShareCast) - UK industrial production registered a contraction of 1.7 per cent month-on-month in September (-2.6 per cent year-on-year), according to the latest data from the Office for National Statistics (ONS).
The consensus estimate had been for a fall of -0.6% month-on-month (-1.6% on year).
The main culprit behind the unexpectedly sharp fall in output was the mining and quarrying sector, where it fell by 15.3% versus August, the biggest monthly decline since 1997, due to a fall in oil & gas extraction to the tune of 20.9%. That, in turn, was the result of maintenance at a number of sites.
Output from the manufacturing sector, on the other hand, rose by 0.1% versus the previous month, not far from the 0.3% increase which had been forecast by economists. Nevertheless, most economists are drawing attention to the fact that
it came in well below the 0.4% which had been estimated by the consensus.
Seven manufacturing sub-sectors saw an increase in production and six a drop. The largest contributions to the month-on-month rise came from the manufacture of pharmaceutical products, which rose by 2.6%, followed by the manufacture of transport equipment which rose by 1.4%.
In the latest quarter output grew by 0.9% versus the previous three months in both manufacturing and industry as a whole. The first estimate of the rate of growth in third quarter gross domestic product by the ONS assumed an increase of 1.1%. Hence, the statistics office believes that the estimated impact on GDP arising from this release is minimal (less than 0.05 percentage points).
Commenting on the data economists at Barclays Research are saying that: "September data conclude a four month period of volatile monthly growth dynamics (...) Beyond the volatile second quarter and third quarter dynamics, we expect both manufacturing and industrial output to remain subdued in the fourth quarter and for growth to stabilise from the beginning of next year. However, given subdued domestic and external demand, we do not expect a return to manufacturing output growth similar to the pace seen during 2010 and the beginning of the 2011, which briefly raised hopes of a manufacturing driven recovery."