UK industrial production rises for eighth month in a row

UK industrial production notched up its strongest run of growth in 23 years as output from the manufacturing sector rose more than expected, official data showed on Wednesday.

Industrial production increased 0.4% in November compared to the previous month, which had been expected by economists, up from October's figure which was revised up to 0.2% from the flat month initially recorded.

Year on year, the Office for National Statistics revealed that this meant IP was 2.5% higher in November, versus a 1.8% consensus forecast and down from a revised 4.3% a month before. This is the first time industrial production has increased for eight consecutive months since May 1994.

Manufacturing production was also up 0.4%, but was only expected to increase 0.3%, while October's figure was revised up to 0.3% from 0.1%. November's output was up 3.5% on the prior year, above the 2.8% consensus forecast, with October revised up to 4.7%.

The rise in production was driven partly by a 3.2% month-to-month rebound in output in the energy supply sector, as average temperatures returned to seasonal norms following October’s unusually warm spell, with manufacturing gains broad-based across the sector, with only transport and mining showing notable falls.

Trade data was also out from the ONS, with the UK visible trade deficit increasing to £12.23bn from £11.67bn, worse than the £10.7bn forecast. Trade with non-EU countries also fell further into deficit territory at £4.67 from £3.37bn, when £2.6bn had been forecast.

The total trade balance widened to a five-month high of £2.8bn, versus an estimate of £1.5bn and with the previous month's revised to £2.27bn.

UK construction output disappointed however, rising 0.4% when a 0.8% increase had been expected after the previous month was revised down to a decline of 1.1%.

It was a mixed bag of November data, said Howard Archer, chief economic advisor to the EY ITEM Club, which as a result expects UK gross domestic product growth to have risen 0.4% quarter-on-quarter again in the fourth quarter of 2017.

"The latest survey evidence indicates that orders continue to hold up well for the manufacturing sector, although domestic conditions could well prove challenging over the coming months. The export environment continues to look pretty bright," Archer said.

Economists at Pantheon Macroeconomics were more cautious. "On the face of it, industry is on track to bolster GDP growth again in Q4; the average level of production in October and November exceeded Q3’s level by 0.9%," said Sam Tombs. "But the closure of the Forties oil pipeline in the North Sea - which carries about one-third of oil and gas output - for most of December suggests that total industrial production plunged by about 2.0% month-to-month in the final month of 2017."

As such, Pantheon estimated that total production rose by just 0.3% quarter-on-quarter in Q4 and contributed a mere 0.05 percentage points to GDP growth, down from 0.19 points in the third quarter, while the recent rise in oil prices is seen as likely to undermine the industrial sector’s recovery in 2018.