Drop in computer, electronics production hurts UK manufacturing output

BRITISH manufacturing output unexpectedly dropped in January as computer and electronics production plunged.

Output declined 0.5 percent after a 0.1 percent increase in December, the Office for National Statistics (ONS) said yesterday.

Economists in a Bloomberg News survey had forecast a 0.2 percent gain. The weakness reflected a 9.5 percent drop in electronics – the biggest in 13 years – after a surge in December because of a large defence contract. Total industrial production, which accounts for about 15 percent of gross domestic product, fell 0.1 percent in January, against an estimate for a 0.2 percent gain.

The computer and electronics sector knocked 0.5 percentage points from output. From a year earlier, production rose 1.3 per- cent, the ONS said.

With the drop due to a onetime effect, the economy may have picked up again last month. Markit Economics said its manufacturing index rose to a seven-month high last month, and the British Chambers of Commerce (BCC) raised its UK projections yesterday, though it said the recovery remained uneven.

“The euro zone is now pick- ing up, which would be of appreciable help to export prospects,” said Howard Archer, an economist at IHS Global Insight in London.

“However, the current strength of the pound against the euro is likely to be a matter of increasing concern to manufacturing exporters.”

Oil and gas extraction jumped 2.4 percent in January from December, reflecting a partial restart of the Huntington North Sea oilfield and an increase in activity at other fields.

At Capital Economics, Paul Hollingsworth said that while survey evidence indicated a manufacturing pick-up was under way, “the emphasis will remain on the services sector to ensure that the overall economic recovery remains robust”. The BCC sees the British economy expanding 0.7 percent this quarter, up from growth of 0.5 percent in the final three months of 2014. It forecasts 2.7 percent growth for the full year and 2.6 percent in 2016.

Weakness in the euro area economy, Britain’s biggest trading partner, and the strength of the pound may act as drags on growth this year.