Weak industrial data hits sterling and could delay rate rise

Growth in the industrial and manufacturing sectors stalled in November, prompting warnings from economists about the strength of the UK economic recovery.

The Office for National Statistics (ONS) said that both manufacturing and wider industrial output were flat in November and the growth figures for October were revised down.

Economists warned that this should delay any rise in interest rates which should be delayed until the economic recovery is more strongly established and better balanced.

David Kern, chief economist at the British Chambers of Commerce, said: “Although longer-term comparisons show solid annual growth, these monthly figures are disappointing.

“It is a timely reminder that the recovery is not yet secure, and should also dampen the clamour for an early rise in interest rates. The government must continue to implement measures to boost growth, to ensure that the UK economy is on firmer ground before any such step is introduced.”

Howard Archer, Chief UK & European Economist at IHS Global Insight said: “The disappointing industrial production and construction output figures for November are likely to reinforce belief with the Bank of England that interest rates need to stay down at 0.50% for some considerable time to come to give the economy every chance of developing broad-based sustainable growth.”

Separate figures showed activity in the construction sector dipped by 0.4 per cent, the biggest monthly fall since June 2012.

Samuel Tombs, UK economist at Capital Economics, said: “November’s weak industrial production figures signal that GDP growth in the fourth quarter is unlikely to be quite as strong as the business surveys have indicated.”

On an annual basis all three sectors showed growth, with manufacturing up by 2.8 per cent on last year and the construction sector up 2.2 per cent on 12 months ago.

Sterling fell after the data was released as traders worried that the data showed the recovery was not as strong as first thought.

Meanwhile, a new survey has found that construction firms are more optimistic about growth in the sector than they have ever been.

The Royal Institution of Chartered Surveyors (RICS) reported the strongest workload balance ever recorded since the survey began in 1994 in the final quarter of 2013.

Respondents said the construction workloads balance went up to +38 in the fourth quarter of last year, the highest since records began in the second quarter of 1994 and up from +31 in the third quarter.

The biggest factor in the increase was a rise in residential house building.

Alan Muse, RICS director of built environment, said: “With the economy having turned a corner in recent months, it would seem that the construction industry has followed suit and activity is up right across the country.

“More homes are being built, infrastructure is being upgraded and each part of the UK is benefiting from this more positive picture.”

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