Industrial output fell at its fastest rate in four years in October following a major oilfield shutdown, hitting hopes that the sector would help boost GDP in the final quarter of the year.
The Office for National Statistics reported today that output fell in that month by 1.3 per cent, the biggest decline since a 3.6 per cent slump in September 2012.
City of London analysts had expected a 0.2 per cent expansion.
Biggest drop since 2012
Kate Davies of the ONS said the disappointing figure was largely down to the total shutdown of the major Buzzard oilfield in the North Sea.
Crude petroleum and natural gas output was a full 10.8 per cent lower on last month.
But manufacturing output was also much weaker than hoped, contracting by 0.9 per cent in the month, where analysts had expected an 0.2 per cent increase.
Sterling fell against the dollar in the wake of the figures, slipping to $1.2585, down around 0.7 per cent on the day.
Analysts said it was now doubtful that the production sector – which accounts for around 15 per cent of GDP – would make any positive contribution to overall output growth in the final quarter of the year.
“It now looks odds on that the sector will contract in the fourth quarter and possibly markedly – even allowing for the fact that there could be a marked bounceback in oil and gas extraction as the oilfield comes back into operation,” said Howard Archer of IHS Global Insight.
However, other analysts pointed to more recent surveys suggesting the production sector will pick up.
“While this is a disappointing set of figures, more upbeat commentary coming from across the sector – driven by resilience in the domestic market and a brightening outlook overseas – points to this trend reversing in the final months of the year,” said Lee Hopley of the EEF manufacturers’ organisation.
The ONS estimates that the production sector contracted by 0.5 per cent in the third quarter of the year, despite overall GDP growth of 0.5 per cent driven primarily by services and household consumption.
The Purchasing Managers’ Index surveys had pointed to strong manufacturing growth in October, although the pace of expansion signalled by the November reading fell back slightly.
The Index slumped dramatically into contraction territory in July in the wake of the Brexit vote, but surged in August and September.
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