UK manufacturing production rises; trade gap narrows on oil

UK manufacturing output rose the most in seven months in November, as total industrial production suffered an unexpected decline due to maintenance at some North Sea oil fields.

Factory production increased 0.7 percent from October, exceeding the 0.3 percent median forecast of economists in a Bloomberg News survey, according to data published today. Industrial output fell 0.1 percent, with oil and gas extraction dropping 5.5 percent, the most since January.

The Bank of England left its key interest rate at a record-low 0.5 percent yesterday as a weakening euro area holds back U.K. economic growth and impedes rebalancing. Separate data today from the Office for National Statistics showed goods exports fell 0.4 percent in November, led by Europe.

Oil also played a big part in the trade report and helped to narrow the goods-trade gap to 8.8 billion pounds, the least since March. Imports plunged 3.2 percent, as oil imports dropped 18.7 percent to the lowest since October 2010. The total trade deficit of goods and services narrowed to the least since June 2013.

There are "encouraging signs that the U.K.'s recovery still had some momentum towards the end of 2014," said Maeve Johnston, an economist at Capital Economics Ltd. in London. "The improvement in the trade deficit should not be a flash in the pan and the manufacturing sector should benefit greatly from lower costs. As things stand, then, 2015 should be a better year for manufacturers and exporters."

The pound stayed higher against the dollar after the data were released, trading at $1.5131 as of 9:59 a.m. London time, up 0.3 percent on the day.

In the three months through November, the trade deficit with Germany widened to a record, reflecting a decline in exports. In the same period, exports to the EU fell 0.3 percent, while exports to countries outside the bloc surged 6 percent.

Work at North Sea fields including Huntington led to the drop in oil and gas extraction in November, according to the ONS. From a year earlier, industrial production rose 1.1 percent.

The increase in manufacturing production on the month was due to the "other manufacturing" category, which includes ships, as well as basic metals. In the three months through November, manufacturing output rose 0.4 percent. From a year earlier, it was up 2.7 percent in November.