U.K. industrial production growth surpasses expectations in November

The U.K. industrial output rose sharply in November, surpassing consensus projections. Industrial output grew 2.1 percent sequentially, as compared with market projections of 1 percent, reversing the 1.1 percent and 1.8 percent contractions recorded in October and over the preceding three months respectively. Within overall production, manufacturing output grew 1.3 percent sequentially after falling 1 percent in October.

The growth in manufacturing was widespread, with gains recording in 10 out of 13 manufacturing sub-sectors. But the increase overall disproportionately showed a 11.4 percent sharp increase in pharmaceutical products that tends to be erratic due to the delivery of large contracts, noted Lloyds Bank in a research report.

Recovery in oil and gas output also underpinned the headline industrial production increase, growing 10.3 percent sequentially and paring the cumulative decline in output since July to 8.4 percent. Utilities and water and sewerage output were not much significant drivers, growing 1.9 percent sequentially and contracting 0.1 percent respectively.

In spite of the recent rebound in readings of manufacturing survey, momentum in official ‘hard’ data for the sector continues to be underwhelming, according to Lloyds Bank. Rolling quarterly growth has rebounded in November, running at -0.6 percent as compared with -0.9 percent in October. A picture of weakness also stays intact in the construction sector, where November data indicated a drop of 0.2 percent month-on-month after falling 0.6 percent in October.

“Taken together, the declines in output in October – with data at the start of the quarter having a disproportionate impact on quarterly growth arithmetic – point to a drag on Q4 GDP from the production and constructions sectors”, added Lloyds Bank.

However, the upwardly-revised momentum in the dominant services sector in the third quarter still appears likely to carry over  to the December quarter and might result in January’s preliminary fourth quarter GDP estimate indicating a quarter-on-quarter growth of 0.5 percent.