UK industrial output grew less than forecast in March

Bloomberg

U.K. industrial production grew less than forecast in March as manufacturing barely rose and oil and gas output shrank.
Output rose 0.3 percent, less than the 0.5 percent gain predicted in a Bloomberg survey of economists, figures from the Office for National Statistics published on Wednesday show.
It followed a 0.2 percent decline in February. Factories increased production by 0.1 percent in March, also less than predicted.
But the figures do not point to any revision of the estimate of overall gross domestic product released last month, the ONS said, in part due to big upward revisions for the broader measure of industrial output for February.
These reflected a recalculation of the effect of the leap year, and late data on the oil and gas industry, which recorded a 17.0 percent annual increase in production in February, and a 10.9 percent annual gain in March.
Overall industrial output rose 0.3 percent on the month in March and was 0.2 percent lower than a year earlier.
For the first quarter as a whole, figures were unchanged from those used in April’s first-quarter GDP estimate, with a quarterly decline of 0.4 percent.
The ONS said that basic iron and steel manufacturing in March was down by 37.3 percent compared with a year earlier and contributed to a drag of 0.3 percentage points on annual industrial output.
Britain’s overall economy slowed in the first quarter, preliminary data has shown, with the pace of growth easing to 0.4 percent compared with 0.6 percent in the previous three months.
Things could get worse in the second quarter. A series of surveys of businesses published last week suggested growth was on course to slow to just 0.1 percent in the April-June period.
The report also confirmed that industrial production dropped 0.4 percent in the three months through March, a second straight quarterly decline. Manufacturers have been hit hard by the global slowdown and surveys suggest their troubles are deepening. A factory index by Markit showed the sector contracting for the first time in three years in April.
The U.K. isn’t alone in seeing weakness in industry at the end of the first quarter. German, French and Italian production all fell short of economists forecasts in March, according to data on Tuesday. Euro-area output probably stagnated that month, economists said before a report later this week.

Momentum Doubts
In the U.K., the latest figures will intensify concern about the sustainability of the economy at a time when its services powerhouse is also showing signs of strain as the referendum of European Union membership looms. The Bank of England will issue new forecasts on Thursday, when it’s forecast to keep the benchmark rate at a record-low 0.5 percent. Traders are pricing in a 40 percent chance of lower borrowing costs this year.
The pound weakened against the dollar and was down 0.2 percent at $1.4417 as of 10:38 a.m. in London. It’s declined 5 percent in the past six months.
Five of 13 manufacturing sectors saw output rise on the month, with the largest contribution coming from transport equipment. Anecdotal evidence suggests car exports were behind the increase. The biggest downward contribution came from food products, beverages and tobacco.
Oil and gas extraction fell 0.1 percent on the month, while the electricity and gas sector saw output rise 3.3 percent, partly due to the colder temperatures in March.
Industrial production fell 0.2 percent from a year earlier, while manufacturing declined 1.9 percent, the biggest annual drop since May 2013. Basic iron and steel output fell by 37 percent.