UK industrial output plunges most in almost three years

[LONDON] UK industrial production fell the most in almost three years in November as warmer-than-usual weather reduced energy demand.

Output dropped 0.7 per cent from the previous month, with electricity, gas and steam dropping 2.1 per cent, the Office for National Statistics said in London on Tuesday. Economists had forecast no growth on the month.

The data highlight the uncertain nature of UK growth, which remains dependent on domestic demand and services. After stagnating in October and falling in November, industrial production will have to rise 0.5 per cent to avoid a contraction in the fourth quarter.

Manufacturing also delivered a lower-than-forecast performance in November, with output dropping 0.4 per cent on the month. On an annual basis, factory output fell 1.2 per cent, a fifth consecutive decline.

The data follow other reports of weakness in the manufacturing sector. A survey published by Markit this month showed growth cooled in December, suggesting it made little contribution to the economy in the fourth quarter.

According to manufacturers' organization EEF, companies are feeling increasingly pressured by issues such as the strength of the pound. It said on Monday that only 56 per cent of manufacturers say the UK is a competitive location, compared with 70 per cent a year ago.

Bank of England officials will probably keep their key interest rate at a record-low 0.5 per cent this week. Minutes of the meeting released Thursday may reveal their thinking on the fall in oil prices and worries about China's economy.

BLOOMBERG