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UK factories drive shock fall in August industrial output

Wednesday, 9 Oct 2013 | 4:41 AM ET
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British industrial output suffered an unexpected fall in August as factories cut production, official data showed on Wednesday, casting some doubt on the positive message about the economy from private-sector surveys.

British industrial output fell by 1.1 percent on the month in August, the biggest drop since September 2012, after rising by 0.1 percent in July.

This was far weaker than the 0.4 percent rise forecast by economists, and contrasts sharply with upbeat news from private-sector surveys of the manufacturing sector.

August's Markit/CIPS purchasing managers' index showed the fastest increase in activity for two years, and a quarterly poll by the British Chambers of Commerce showed factories' sales rising at the fastest rate since the early 1990s.

(Read more: China charm offensive may not bring back UK investment)

August's fall in industrial output was driven by a steep decline in manufacturing output, which fell 1.2 percent on the month, in contrast to economists' forecasts of a 0.4 percent rise. Firms in the basic pharmaceuticals, melectronics and food and beverages sectors led the decline.

Output from Britain's oil and gas industry, which also feeds into the broader industrial output measure, was weak too. Production dropped by 0.1 percent on the month and is 17.0 percent lower than a year earlier, the biggest drop since March.

The ONS said that there was no specific reason for the decline in manufacturing, but noted that output in August tended to be weak and that seasonal adjustment to offset this was complicated by the London Olympics in August last year.

The manufacturing sector had a stronger performance in the three months to August however, with output up 1.2 percent, the biggest rise since October 2010.

(Read more: Why the UK's auto industry remains crisis free)

Britain's economy expanded by 0.7 percent in the three months to June, and many economists expect it to beat that rate in the third quarter.

Industrial output makes up 15 percent of Britain's economy.

Separate ONS data released at the same time showed that Britain's goods trade deficit narrowed slightly but was still wider than expected at 9.625 billion pounds.

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