Output figures raise hopes of end to recession

INDUSTRIAL output rose slightly faster than expected in November, helped by a jump in oil and gas extraction, but manufacturing unexpectedly stagnated for a second month, official data showed this week.

The figures are likely to support expectations that Britain's economy emerged from its deepest recession for more than 50 years at the end of 2009, though weak manufacturing raises concerns about the sustainability of any recovery.

"At face value, headline industrial production is not a bad number, but it is disconcerting that manufacturing went sideways," said Alan Clarke, economist at BNP Paribas.

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"If manufacturing can't expand when there are so many favourable tailwinds – currency weakness, end of destocking and rebounding global demand – when can it?"

The Office for National Statistics said industrial output rose 0.4 per cent in November after a downwardly-revised 0.1 per cent decline in October. This gave a six per cent year-on-year decline, easing from October's 8.4 per cent fall. Analysts had expected a monthly rise in output of 0.3 per cent.

The data is likely to increase the Bank of England's concern about how firm a footing the economy is on when it considers whether to expand its 200bn quantitative easing policy next month. Manufacturing output unexpectedly showed no growth for a second month running, and the annual decline slowed less than forecast to 5.4 per cent from 7.8 per cent.

This came as a particular surprise to economists as surveys by the Chartered Institute of Purchasing and Supply and the Confederation of British Industry had indicated that the sector grew over the period.

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The ONS said six of the 13 manufacturing sub-sectors recorded monthly falls, six rose and one was unchanged.

Rises in aerospace and motor vehicle production were offset by falls in the output of arms and general machinery as well as food, drink and tobacco.

The main driver behind November's pick-up in industrial output was a 7.2 per cent rise in oil and gas extraction, the biggest monthly increase since September 2008 after an end to maintenance work which had depressed output.