Rebound in industrial output gives hope of avoiding a triple dip

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BRITISH industrial output rose a touch more than expected in December, ending its worst quarter since the start of 2009 with a glimmer of hope for a Government desperate to avoid sliding back into recession.

The broad indicator of output, which includes energy production and mining, grew 1.1 per cent compared to a revised 0.2 per cent rise in November and economists’ forecasts for growth of 0.9 per cent.

Within that, manufacturing output climbed 1.6 per cent on the month in December after a fall of 0.3 per cent in November, the Office for National Statistics said.

“The significant rebound in manufacturing output over December is welcome, which should help to dispel fears over a triple-dip recession,” said Philip Shaw, economist with Investec.

The economy disappointed the market by shrinking in the fourth quarter and another contraction at the start of this year would mark its third dip into recession since the 2008 banking crisis.

Whether it does may be of more political than economic significance, and economists say the bigger concern is that growth shows little sign of a more robust recovery. “The key point is manufacturing output is still 1.5 per cent lower than it was a year ago,” said Commerzbank analyst Peter Dixon.

“Hopefully, we will get a little more strength in the course of 2013 as the eurozone crisis begins to normalise.”

Oil field shutdowns drove the 1.9 per cent slide on the quarter, which was the worst since the first quarter of 2009.

That was a slightly bigger decline than originally shown in the GDP figures, although the ONS said the latest number would have a negligible impact on its first GDP estimate.

Leading indicators have given some tentative signs of an economic recovery at the start of this year.

The Bank of England kept its support for the economy steady yesterday, voting to reinvest £6.6bn of bond holdings that mature in March and saying it would provide more stimulus if need- ed.

After a two-day meeting, the Bank as expected said its main interest rate would stay at 0.5 per cent and that it would keep its gilt purchases at the £375bn worth bought so far.

But, unusually, it also issued a statement that laid out its current thinking and said it would reinvest the proceeds of the maturing gilts.

“The committee agreed that it stood ready to provide additional monetary stimulus if warranted by the outlook for growth and inflation,” the Bank said.

“The UK economy is set for a slow but sustained recovery in both demand and effective supply.

“But the risks are weighted to the downside.”