UK industrial production kicks off 2016 on stronger footing thanks to manufacturing sector

Britain's industrial sector recovered from a poor finish to 2015 and kicked off the new year on an upbeat note thanks to a stronger than expected performance in the manufacturing sector, official figures released on Wednesday (9 March) showed.

According to the Office for National Statistics (ONS), industrial production in the UK grew 0.3% month-on-month in January, slightly below the 0.4% gain analysts had expected but rebounding strongly from the 1.1% decline posted in December 2015.

The ONS attributed the upturn to a solid display across the board, which saw growth in three of the four main sectors. Manufacturing, the largest component of production, had the most positive contribution, with an increase in output of 0.7% from the previous month, reversing a 0.3% decline in the previous month and beating analysts' forecast for a 0.2% gain.

On a year-on-year basis, industrial production grew 0.2%, rebounding from a 0.2% decline in December and compared with forecast of no growth.

Meanwhile, year-on-year manufacturing output fell 0.1% in January, as did output in seven of the 13 manufacturing sub-sectors.

However, the figure marked a drastic slowdown in the pace of decline, as output had fallen 1.7% year-on-year in December and economists expected a 0.7% drop.

"While 2016 started slightly better, near-term prospects don't look great with the manufacturing sector dealing with subdued global growth and North Sea production hit by low oil prices," said Scott Bowman UK economist at Capital Economics.

"That said, the more recent depreciation of trade-weighted sterling and our expectations of a pick-up in world growth in 2016 should slightly improve the manufacturing sector's fortunes as this year progresses."

Mark Stephenson, UK manufacturing industry leader at Deloitte, said the manufacturing output figures showed how resilient the industry was and signalled the prospect of a more positive year ahead for UK manufacturers.

"The challenges UK manufacturers are up against should not be underestimated," he said. "Slow global economic growth, weak Chinese trade data, downgraded UK growth forecasts, turmoil in the steel industry and the PMI at its lowest point for almost three years, are just some of the factors at play."