Industrial output figures imply UK economic slowdown in first quarter

UK industrial production output grew only very slightly in February, which economists said indicated that UK economic growth slowed in the first quarter.

After a 0.3% fall over the previous two months, total production output increased by 0.1% in February 2015 compared to the previous month, according to the Office for National Statistics.

There were increases in three of the four main sectors, with manufacturing bouncing back from its 0.5% fall in January with a 0.4% rise after, although overall industrial production held back by a drop in oil and gas production.

For the year-on-year figures, there were increases in two of the four main industrial sectors, with manufacturing output being the largest contributor with a 1.1% rise.

Other figures from the ONS released on Friday showed a further 0.9% monthly decline in construction output, following the 2.5% fall in January.

Economist Howard Archer at IHS Global Insight said these combined data releases significantly raised the probability that UK GDP growth slowed in the first quarter from the 0.6% quarter-on-quarter rate seen at the end of 2014.

"Given that the first quarter GDP data will be released at the end of April, this would be very unwelcome news for the Conservatives and Liberal Democrats so close to the general election given their hopes that many undecided voters will ultimately decide to reward them for the economy’s improvement."

Sam Tombs at Capital Economics said the industrial and construction figures suggested GDP growth in the first quarter "may be disappointingly weak", with an initial estimate of GDP now looking set to reveal a slowdown to quarterly growth of around 0.4%.

But he doubted that the economic recovery was "a busted flush" as initial official estimates are often revised and recent amendments have more often been upward.

"The stimulus provided to the non-oil sector from lower crude prices, cheaper credit and somewhat stronger demand in the euro-zone all suggest that the recovery is poised to gain rather than lose pace this year.

"Accordingly, today’s figures do not change our view that the UK economy is on course for its best year since 2006, with GDP rising by a healthy 3%."