UK industrial output shrinks unexpectedly in February, adding to signs of Brexit slowdown

Industrial output fell 0.7 per cent in February, worse than all forecasts in a Reuters poll of economists that pointed to a 0.2 per cent increase

Output in manufacturing, which accounts for about 10 per cent of Britain's gross domestic product, unexpectedly fell 0.1 per cent following a 1.0 per cent fall in January (Reuters)

British industrial output fell unexpectedly in February and manufacturers struggled, according to official data on Friday that added to signs economic growth may have slowed as Britain prepares to leave the EU.

Industrial output fell 0.7 per cent in February, worse than all forecasts in a Reuters poll of economists that pointed to a 0.2 per cent increase and following a 0.3 per cent decline in January.

Separate figures showed Britain's goods trade deficit unexpectedly hit a five-month high in February and January's deficit was revised up too, the Office for National Statistics said.

Another batch of figures showing a slump in construction output chimed with recent business surveys that suggested Britain's economic performance probably peaked towards the end of last year.

The latest ONS data suggested manufacturing was not making up for signs of a consumer spending slowdown as some economists had hoped following the pound's post-Brexit vote drop.

Output in manufacturing, which accounts for about 10 per cent of Britain's gross domestic product, unexpectedly fell 0.1 per cent following a 1.0 per cent fall in January, disappointing against forecasts for a 0.3 per cent rise in the Reuters poll.

British manufacturing had a mixed performance in 2016, with economic growth driven mostly by the much larger services sector and consumer spending.

A closely-watched business survey on Monday showed British manufacturing lost some of its momentum in March, as export orders grew more slowly and demand for consumer goods faltered against a backdrop of rising inflation pressures.

Separate figures from the ONS showed Britain's goods trade deficit with the rest of the world rose to £12.461bn, compared with an upwardly revised £11.971bn pounds in January. Economists polled by Reuters had expected a reading of £10.9bn.

The ONS said the trade deficit was pushed up by erratic factors like imports of gold and aircraft.

The ONS also released figures for construction output in February, which slumped 1.7 per cent on the month - the biggest drop in almost a year.

The Reuters poll had pointed to stagnation on the month but output in February was dragged down by 2.6 per cent drop in the house building sector, the sharpest decline since mid-2015.

On the year, construction output rose just 0.5 per cent in February - the weakest reading since March 2016 and a far cry from forecasts for a 1.9 per cent rise.

Reuters