LONDON (Reuters) - British factory output suffered its biggest monthly fall in almost a year in February, confounding previous upbeat private-sector surveys and casting doubt on the health of the country's economic recovery.
Strong growth in gas and oil production lifted the broader industrial production measure.
ANALYSTS' COMMENTS
SAMUEL TOMBS, CAPITAL ECONOMICS:
"February's terrible industrial production figures put something of dent in hopes of a decent increase in GDP in the first quarter.
"Manufacturing output fell by a whopping 1 percent on the previous month, while January's increase was also revised to a fall. Output has now fallen in four of the last five months, in contrast to the expansionary picture painted by the surveys.
"Granted, this hefty drop did not prevent overall industrial production from rising by 0.4 percent month-on-month, thanks to sharp rises in energy output and oil and gas extraction. But these were weather-related and likely to be reversed in March.
"Industrial production will still fall by less in Q1 than in Q4, and overall GDP will probably still be positive. Nonetheless, hopes that manufacturing could help to drive a strong and sustained recovery in the economy are rapidly fading."
HOWARD ARCHER, IHS GLOBAL INSIGHT:
"It looks likely that industrial production will be flat at best in the first quarter of 2012, so it will need a decent pick-up in services activity for overall GDP growth to reach the 0.3 percent quarter-on-quarter rate that we have pencilled in.
"Survey evidence suggests that this is possible and it does appear that the economy overall picked up appreciably in March compared to February.
"While we suspect that the manufacturing sector is in better shape than indicated by the February output data, it clearly does still face a challenging environment.
"Domestic demand for manufactured goods is still handicapped by a still appreciable squeeze on consumers' purchasing power as well as by tighter public spending."
TOM VOSA, NATIONAL AUSTRALIA BANK:
"Industrial production, which is I suppose the most important for the GDP data, was broadly in line. So we are on track there, and that would suggest that the production sector will add to GDP growth in the first quarter unlike contracting in Q4.
"Manufacturing looks to be weather-related... It wasn't a broad-based fall in manufacturing output, it was two specific sectors which have suffered from a shock. If that's the case, we would expect to see a bounce-back in March.
"Manufacturing remains extremely erratic. It's concerning now that both the CBI industrial trends and the PMI manufacturing surveys aren't picking up the volatility in the real data, and they would point to stronger growth rates.
"If I were on the MPC, I'd be more worried about whether inflation is coming back as quickly as I thought. For quite a few of them (MPC members), I suspect, it will be the CPI number that will be the swing factor, not the activity data."
JAMES KNIGHTLEY, ING:
"After a good week for UK data the March industrial production report is a little disappointing.
"Headline production did rise 0.4 percent versus the 0.3 percent consensus, but this was purely down to huge rebounds in utilities output (weather-related) and mineral and energy extraction, which had seen substantial falls over the past three to six months.
"Manufacturing output actually fell 1 percent month-on-month after a 0.3 percent drop in February, which doesn't tally with the manufacturing PMI numbers.
"It is possible that the numbers get revised higher eventually, but on the face of it suggests that the sector will not be making a significant contribution to first quarter 2012 GDP."
ROSS WALKER, RBS:
"They were a strange set of numbers. We thought there would be an energy-led bounce, but not quite on this scale as it were. Obviously the weakness in manufacturing is a big surprise. It looks fairly broad-based in terms of sectoral, industrial breakdown.
"It doesn't feel right - the 1 percent fall in manufacturing. It looks anomalous, it doesn't really go with the big grain of the surveys.
"Although the numbers have been a bit erratic on a month-to-month basis, there was no obvious reason why it should fall very sharply.
"This shouldn't throw any real spanner in the works, it isn't going to prompt people to change GDP forecasts."
GEORGE BUCKLEY, DEUTSCHE BANK:
"The manufacturing figures don't look so great, we've had a downward revision and also a weak number. Of course, that's not what goes into the headline GDP figures - that's industrial production which has performed a lot better.
"It is going to make a decent number on GDP in the first quarter difficult to achieve, and with these sort of rates it might also mean a weak second quarter as well.
"I think we are looking at a fairly modest rate of GDP growth for the first quarter on the back of these numbers.
"The news last week was dreadful and this week has been a lot better - so it has been very choppy.
"This is exactly the sort of thing you would expect to see in a more muted recovery like the one we are experiencing."
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KEY FIGURES FOR FEB INDUSTRIAL PRODUCTION
INDUSTRIAL PRODUCTION FEB JAN (PREV JAN) F'CAST
Mth-on-mth change in pct 0.4 -0.6 (-0.4) 0.3
Yr-on-yr change -2.3 -4.0 (-3.8) -2.3
KEY FIGURES FOR FEB MANUFACTURING
Mth-on-mth change in pct -1.0* -0.3 (0.1) 0.1
Yr-on-yr change -1.4** -0.1 (0.3) 0.1
KEY POINTS
- Biggest month-on-month fall in factory output since April 2011
- Biggest annual fall in factory output since December 2009
- Biggest three-month on three-month rise in factory output since July 2011
- Biggest month-on-month rise in oil and gas output since March 2010
- Smallest annual fall in oil and gas output since January 2011
- Biggest month-on-month rise in electricity and gas output since December 2010
(Reporting by London bureau)
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