LONDON: The UK’s total industrial production dropped far below estimates between November and December to its lowest level in more than three years, driven down by a steep fall in mining and quarrying.
A steep plunge in the extraction of petroleum and natural gas, together with a weak performance in manufacturing helped push the UK’s total industrial production between November and December down by 1.1%; it’s lowest output level since September 2012, figures from the Office for National Statistics (ONS) showed on Wednesday.
Manufacturing, the largest sub-sector of production, also failed to meet expectations and fell 0.2% month on month, but not as weak as November’s revised figure of a 0.3% drop. However, this is the third consecutive fall since September 2015. The main driver of the fall in manufacturing was the manufacture of wood, paper products and printing.
Today’s release showed total production was revised down overall in the fourth quarter to a decline of 0.5%. ONS analyst Alaa Al-Hamad said this downward revision was driven mainly by weaker mining and quarrying as well as lower electricity and gas production.
Al-Hamed said the negative impact from this change was revised to 0.04 percentage points, meaning that after rounding, the impact on total GDP growth in the fourth quarter will remain flat. The UK economy picked up pace in the final three months of last year to 0.5% from 0.4% a quarter before. Growth was driven on the output side only by the services sector.
Year-on-year manufacturing fell 1.7% with machinery and equipment being the biggest downward driver. The ONS said the manufacture of machinery and equipment fell 13.5% which is the 13th consecutive fall since November 2014 and: “Anecdotal evidence suggested that there was a general decrease across the industry compared with a year ago.”
Across total production in the UK there were falls in 3 of the 4 main sectors with the largest fall coming from mining and quarrying which dropped 4%, the largest fall since September 2015. The only area which showed a healthy rise was water supply, sewerage and waste management.
Comparing December this year to the same month last year, total production fell 0.4%. However, total production output is estimated to have increased by 1% between 2014 and 2015 with manufacturing being the only sector to fall during this time.
Looking ahead, Markit said the start of 2016 saw a “modest improvement in the rate of growth in the UK manufacturing sector”.
Still the report warned: “The trend in new export orders, however, fell back into decline.”
Markit said based on feedback: “Companies linked lower overseas sales to stronger competition and tough market conditions. Some firms also noted that, despite recent easing, the sterling-euro exchange rate remained an issue impacting on trade flows with the euro zone.”
David Noble, group chief executive officer at the Chartered Institute of Procurement & Supply, said: “The domestic market continued to buoy up manufacturing growth as the year starts in a positive, if slightly reserved fashion.”
“Staffing levels fell, albeit slightly to try and control costs – all designed to gear up for the year ahead. The increase in demand for inputs also exerted greater pressure on supply chains, leading to longer vendor delivery times and rising reports of raw material shortages.”
