UK Industrial Output Posts First Rise Since Feb '08


British industrial output rose unexpectedly in April and for the first time in more than a  year, official data showed on Wednesday, raising the prospect  that the economy could exit recession as early as this quarter.

The Office for National Statistics said industrial output,  which contributes 18 percent to gross domestic product, rose 0.3 percent on the month -- the first increase since February 2008.

Analysts had expected a fall of 0.1 percent. 

On the year, industrial production was 12.3 percent lower.

Manufacturing output rose 0.2 percent on the month in April, again an unexpected rise and following revised figures showing a similar rise in March, which was the first increase for a year.

The figures raised expectations that Britain will be the first major industrialized nation to emerge from recession,  although there is doubt about how sustainable any  recovery will be because banks remain reluctant to lend and rising output could largely reflect firms replenishing depleted inventories.

"The ... figures generally bode well for a recovery in the economy and it's quite feasible that GDP will have posted a gain over the second quarter," said Philip Shaw, economist at Investec.

"(But) there remain questions over the recovery in final demand, which is significant because the inventory effect is only likely to last one or two quarters," he said. "So the jury's still very much out on the strength or the shape of the medium term recovery."

Moreover, at some point, UK authorities will have to tail off massive stimulus measures.

The BoE has cut interest rates to a record low of 0.5 percent and is more than halfway through a 125 billion pound  asset-buying spree funded by newly-created money and aimed at  kickstarting the economy. 

BoE Deputy Governor Paul Tucker said on Tuesday that  short-term economic indicators had improved slightly but the  medium-term outlook was highly uncertain.

"From a policy perspective, it's not going to make much  difference," said Amit Kara, an economist at UBS, said of the data.

"The MPC (Bank of England interest rate-setting committee)  will want to see more evidence of a sustainable recovery before  they consider an exit strategy."

The ONS said revisions to previous industrial output figures would have no impact on first quarter GDP, which showed a fall  of 1.9 percent on the quarter -- the sharpest rate of decline in 30 years.

In separate data, the ONS said Britain's total goods and services trade deficit with the rest of the world widened to its largest since September last year.

The total trade deficit swelled to 3.014 billion pounds ($4.94 billion) in April from 2.716 billion pounds in March.