UK output fall ends period of expansion

UK manufacturing shrank for the first time in 11 months in February, led by output of machinery and equipment.

The drop brings to an end an unprecedented run for manufacturers that helped to underpin the economy as a squeeze from rising prices took its toll on consumer spending.

Factory output declined 0.2% — missing expectations for a 0.2% increase — after stagnating in January.

Overall industrial production increased a smaller-thanforecast 0.1%, with the growth largely due to below-average temperatures boosting demand for energy.

Samuel Tombs at Pantheon Macroeconomics expects a stronger production figure in March but said it would not be enough to offset weakness in retail and consumer activity and construction, all of which took a hit from the snowstorm dubbed the Beast from the East.

GDP growth may be weaker in the first quarter than the 0.3% predicted by the Bank of England, which casts doubt on whether an interest rate increase is as likely as market pricing suggests.

The National Institute of Economic and Social Research said on Wednesday it was forecasting an expansion of just 0.2%, half the pace of the fourth quarter, with the severe weather likely to have hurt “all major sectors of the economy”.

Seven out of 13 manufacturing sectors saw output decline, with machinery and equipment dropping 3.9% after a strong January.