March 9, 2018 / 11:13 AM / in 9 months

UPDATE 1-UK factories start 2018 in low gear, construction tumbles

    * UK factory output inches up in January
    * Construction suffers monthly biggest drop since 2012
    * Figures suggest UK economy continues on slow path

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    By Andy Bruce and William Schomberg
    LONDON, March 9 (Reuters) - British industry kicked off 2018
in low gear and a downturn in construction deepened, according
official data on Friday that suggested Britain's economy remains
on a slow path ahead of Brexit.
    Britain went from being the fastest-growing Group of Seven
economy to the weakest last year as the Brexit vote weighed on
household spending and investment by companies.
    Manufacturing output, which has been a bright spot thanks to
the strong global economy, inched up only 0.1 percent
month-on-month in January after a 0.3 percent rise in December,
the Office for National Statistics said. 
    That was slightly weaker than the consensus in a Reuters
poll of economists that pointed to 0.2 percent rise.
    Nonetheless, January marked the ninth month in a row of
manufacturing growth in monthly terms - the longest such run
since records began 50 years ago.
    But the overall picture was one of slowing momentum. Over
the three months to January, manufacturing output rose 0.9
percent, the weakest pace since mid-2017.
    "The impetus to growth from sterling's 2016 depreciation is
beginning to tail off," economist Samuel Tombs from Pantheon
Macroeconomics said.
    British financial markets showed little reaction to the
    Construction output plunged 3.4 percent month-on-month in
January after a 1.6 rise in December, the biggest drop since
June 2012 and worse than any forecast in the Reuters poll.
    The slump was driven largely by a fall in housebuilding, a
disappointment for finance minister Philip Hammond who is
seeking to boost home construction - although growth was strong
in late 2017.
    Also the collapse of major construction firm Carillion in
January likely hurt overall output, although an ONS spokesman
said the agency could not comment on how individual firms
affected the data.
    Overall industrial output rose by a monthly 1.3 percent in
January, reversing December's 1.3 percent fall, as the Forties
oil pipeline, Britain's biggest, reopened after closing for
    Economists taking part in a Reuters poll had expected to see
output rebound 1.5 percent on the month.
    Industrial output accounts for 14 percent of Britain's
overall economic output.
    Britain's economy grew at a quarterly rate of 0.4 percent in
the three months to December 2017, slowing slightly from the
third quarter.  
    Last month the Bank of England upgraded its growth forecasts
for Britain on account of an improving global economy, and said
interest rates are likely to rise faster and to a greater extent
than it expected in late 2017.             
    Britain's official budget forecasters are expected to follow
suit and raise their growth forecasts too when they publish new
projections on Tuesday.    
    Separate ONS data showed Britain's goods trade deficit with
the rest of the world widened slightly in January to 12.325
billion pounds ($17.01 billion), a touch bigger than expected in
the Reuters poll.
    The ONS said the deficit was pushed up by a large fall in
fuel export volumes, possibly reflecting the Forties pipeline
shutdown. The trade deficit in oil rose to its highest since
September 2016.
    But even excluding oil and high-value items like aircraft
and ships, the goods trade deficit struck its highest level
since March 2017.
    "While stronger global economic growth will continue to
support demand for UK goods and services, the relative weakness
of sterling remains more of a hindrance than a benefit," British
Chambers of Commerce head of economics Suren Thiru said.
    Still, Britain's total trade deficit for the fourth quarter
was revised down to 7.8 billion pounds from 10.8 billion pounds,
mostly due to higher than previously reported exports of
services, underscoring the importance for Britain's government
to include the sector in a Brexit deal with the European Union.
    ($1 = 0.7246 pounds)

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