A sharp fall in North Sea oil production in February hit the UK’s industrial production output and drove down the pound on foreign exchange markets.
Sterling fell to a five-year low against the dollar as analysts predicted a sharp slowdown in the British economy in the first quarter to 0.4%.
While the manufacturing sector made steady progress in the second month of the year, a decline in North Sea oil and gas combined with a fall in mining and quarrying to limit industrial production to a 0.1% rise.
Separate figures from the Office for National Statistics for the construction industry, which showed declines in infrastructure and private house building, added to concerns that a tepid recovery in Britain’s productive industries has made the economy reliant on consumer-driven services and rising levels of household debt.
Alan Clarke, UK economist at Scotia Bank, said the weak state of the economy would prove embarrassing for the coalition going into the election.
“Unless we get big revisions to these data, or a massive jump in services output in February and March, then GDP growth of just 0.4% quarter on quarter is looking like the most likely outcome.
“This is not going to make pleasant reading for the coalition government in the final days of the election campaign,” he said.
Clarke warned that a 0.9% month on month fall in construction, which followed a 2.5% dive in the previous month, would be a drag on first quarter growth.
He added that the lacklustre 0.1% rise in industrial production after shrinking by 0.1% in January would add to the UK’s woes.
“In other words, there has been no growth in IP so far in Q1 and construction has shrunk by 3.5%,” he said.
Factory output improved, but mainly in the automotive and car sector, which recently reported its best production output this century. Nevertheless, factory output in the first quarter is so far running 0.2% below the fourth quarter of last year.
Activity slowed across all areas of the building industry except new projects in the public housing sector, according to the ONS, which indicated that housing associations were among the few organisations to expand their output in February. The broader measure of ongoing activity showed that all parts of the construction industry declined, including public housebuilding , private housebuilding, civil engineering and infrastructure work.
