Flat industrial production expected to only be temporary

UK industrial production growth has slowed to a temporary halt after a six-month growth spurt, official figures confirmed on Friday, with unseasonably warm weather depressing energy output.

Industrial production in October was flat month-on-month, as expected, following the 0.7% rise the month before, though production was 3.6% higher year-on-year, which was above the 3.5% consensus forecast and up from the previous month's 2.5%.

Manufacturing production grew by 0.1% on the month, the smallest increase since May but better than forecasts for a flat month after 0.7% growth a month earlier.

Compared to October last year, manufacturing production grew 3.9%, versus the 3.8% expected by the market and up from the previous month's 2.7%.

Output in the energy supply sector fell by 3.3% due to warmer weather, with average temperatures 1.7 degrees Celcius above their average for the previous 45 years.

However, the drag from energy was offset by a 2.7% jump in mining and quarrying output, amid a further recovery in North Sea oil production, and a 1.4% increase in water supply output.

October’s figures suggest industrial production is likely to provide a smaller contribution to GDP growth in the fourth quarter than the 1.1% growth in the third, said economist Sam Tombs at Pantheon Macroeconomics, though growth in manufacturing is expected to return.

"Looking ahead, output in the energy supply sector likely mean-reverted in November as the weather returned to seasonal norms. In addition, surveys are consistent with solid growth in manufacturing output in the near-term," he said.

"But past experience suggests that the impetus to growth in manufacturing output from the weaker exchange rate will fade soon, now that 18 months have passed since the biggest decline in sterling. In addition, the recent surge in oil prices—the Brent crude price has jumped by $10 to $62 in just three months—will make low value-added production unprofitable again soon."