UK Industrial Output Falls; Visible Trade Gap At 5-Month High

UK industrial and construction output declined unexpectedly in February, signaling a slowdown in the first quarter. Moreover, the visible trade deficit widened to a 5-month high.

Largely reflecting weak energy demand, industrial output dropped unexpectedly by 0.7 percent month-on-month in February, figures from the Office for National Statistics showed Friday.

Economists had forecast output to grow 0.2 percent after falling 0.3 percent in January.

Manufacturing output dropped only 0.1 percent after easing 1 percent in January. Nonetheless, the drop was in contrast to the expected growth of 0.3 percent.

Year-on-year, industrial production growth slowed to 2.8 percent from 3.3 percent in January. Economists had forecast a 3.7 percent increase.

Meanwhile, growth in manufacturing accelerated to 3.3 percent from 2.6 percent, but slower than the expected 3.9 percent.

Driven by a fall in all new work, construction output decreased 1.7 percent from January, confounding expectations for an increase of 0.1 percent and marked the biggest fall since March 2016. Year-on-year, output rose 0.5 percent.

In a separate communique, the ONS said the visible trade deficit increased unexpectedly to GBP 12.46 billion in February from GBP 11.97 billion in the prior month. The shortfall was forecast to narrow to GBP 10.9 billion.

This was the biggest deficit since September 2016.

Including goods and services, the trade gap widened to GBP 3.66 billion from GBP 2.97 billion in January. The increase reflects a GBP 0.4 billion decrease in exports and a GBP 0.3 billion increase in imports.

The trade in services showed a surplus of GBP 8.78 billion compared to GBP 8.99 billion in previous month.

Despite the disappointing data in February, with temporary factors at play, Ruth Gregory, an economist at Capital Economics, said she remains optimistic that there should be some bounce back at the end of the first quarter.

IHS Markit Economist Howard Archer, said a disappointing package of data for the UK economy which fuels suspicion that GDP growth slowed markedly, largely due to consumers becoming more cautious.

The economist suspects UK GDP growth in the first quarter of 2017 slowed to 0.4 percent.