Industrial production fell sharply and unexpectedly in October, dealing a blow to hopes that the UK economy will end 2016 on a high.
A surprise 1.3% drop in production over the month followed a 0.4% decrease in September, according to the Office for National Statistics, and was the biggest monthly fall in four years. Economists had forecast a 0.2% rise for October.
Howard Archer, chief UK economist at IHS Markit, said the figures were “an appreciable blow” to prospects for the UK economy in the fourth quarter. The economy was stronger than expected in the months immediately after the Brexit vote in June, growing by 0.5% in the third quarter.
Archer said: “We had believed that there was a good chance that UK GDP growth in the fourth quarter could match the resilient 0.5% growth in the third quarter. October’s drop in industrial production puts a significant dent in prospects.”
One of the fall’s main drivers was a 10.8% decline in oil and gas extraction resulting from a temporary shutdown in the Buzzard oilfield in the North Sea.
A breakdown of the figures also showed that manufacturing output – the largest part of industrial production – also fell unexpectedly, by 0.9% in October after a 0.6% increase a month earlier. Economists were expecting a 0.2% rise in manufacturing.
Kate Davies, senior statistician at the ONS, said: “October saw a sharp fall in UK oil output, largely down to the total shutdown of the major Buzzard oilfield.
“Small falls in output across a range of sectors also contributed to a drop in overall manufacturing.”
On an annual basis, industrial production was down 1.1% in October, while the narrower measure of manufacturing output was down 0.4%.
Martin Beck, senior economic adviser to the EY Item Club, a forecasting group, said Britain’s “makers” had got off to a weak start in the fourth quarter, but said some of the erratic factors that were behind the weak performance in October should start to fade.
“As the role of temporary factors set to fade at some point, an improved performance over the remainder of the quarter seems likely, but that industry will make a positive contribution to GDP growth is looking tenuous,” Beck said.
