Oil and gas extraction boosts UK industrial output in April

A jump in mining output boosted the UK's industrial production in April.

Industrial output in the UK sped past forecasts in April, thanks to a strong contribution from mining.

Production grew by 0.4% month-on-month, as an 8.7% surge in oil and gas extraction pushed mining and quarrying output significantly higher.

Yet “since the oil price has levelled off since April, output in this sector is unlikely to grow much further,” analysts at Capital Economics pointed out.

Economists had anticipated a gain of just 0.1% on the month and 0.6% on the year.

What matters for GDP growth is overall industrial production

In comparison to the year-ago period industrial output was higher by 1.2%, with increases being registered in all four of the main sectors.

Factory output fell 0.4% when compared with the prior month (consensus: 0.1%), mainly as production of basic pharmaceutical products was dialed back, but increased by 0.2% in year-over-year terms (consensus: 0.4%).

“Nonetheless, what matters for GDP growth is overall industrial production. Even if it only holds steady in May and June it would still see a 0.8% jump in the second quarter, versus the first three months of the year – the largest increase since the last quarter of 2010 – following a rise of 0.2% in quarter one,” Samuel Tombs, senior UK economist at Capital Economics, wrote in a research note e-mailed to clients.

That may be just as well given recent weak readings on surveys of sentiment for the manufacturing sector and the four per cent appreciation in the trade-weighted value of sterling since the start of the year.

In the 3 months to April 2015, production and manufacturing were 9.5% and 4.4% respectively below their figures reached in the pre-downturn gross domestic product peak reached in the first quarter of 2008.