Growth picks up, but industrial production slips

 

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The Independent Online

The economy picked up speed in January on the back of higher services output, according to the latest forecast from the National Institute of Economic and Social Research.

NIESR estimates that GDP growth in the three months to January was 0.7 per cent, up from the 0.5 per cent in the three months to December.

However, the forecaster thinks industry and construction both fell backwards between October and January and that only the services sector, which accounts for around three quarters of output, expanded.

That unbalanced picture was borne out by the latest hard data from the Office for National Statistics yesterday, which showed a bigger than expected slide in industrial production in December.

Maintenance work on North Sea oil and gas fields meant industrial output fell 0.2 per cent in December,  worse than City of London economists’ forecasts for a 0.1 per cent rise. This followed stagnation in November.

Manufacturers managed to eke out a 0.1 per cent rise on the month, although a weaker eurozone is dragging on a sector still 5 per cent below its pre-recession peak, seen at the beginning of 2008.

Over the quarter, industrial production was up 0.1 per cent, stronger than the ONS estimated in January, but unlikely to be enough to lift its initial 0.5 per cent estimate.

“December’s industrial production figures confirmed that the recovery evident in early and mid-2014 fizzled out at the end of the year,” said Martin Beck, senior economic adviser to the EY Item Club.

But he added that falls in the global oil price should boost manufacturing.

The main contributors to the increase in manufacturing output were computer and electrical products, aerospace equipment and food products, the ONS said.

The statistics agency added that lower oil prices had not yet had a clear impact on output, but that the Department for Energy and Climate Change was forecasting a possible effect over the first three months of 2015.

Work on the Huntington field in the North Sea, which was due to end in November, carried on into December.

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