UK manufacturing expands for sixth month in October, best run for at least 20 years

UK manufacturing expands for sixth month in October, best run for at least 20 years
FILE PHOTO: A worker assembles metal components at the Mec Com Ltd factory near Stafford, central England December 15, 2016. REUTERS/Phil Noble/File Photo
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LONDON (Reuters) – British manufacturing output expanded for the sixth month in a row during October, the longest such run in at least 20 years, helped by the production of cars for export.

The data, released on Friday along with figures for construction and the trade balance, added to signs that British industry may be a bright spot in 2018, when most forecasters expect the economy will slow.

Britain’s economy has lost momentum this year as higher inflation caused by the fall in sterling after last year’s Brexit vote hurt consumers, although some exporters have gained from the weaker pound and the stronger euro zone economy.

Manufacturing output increased 0.1 percent in October from September, as expected in a Reuters poll of economists.

“While manufacturing was relatively subdued overall in October despite record production of cars destined for export, the longer-term picture is one of strong growth,” ONS statistician Kate Davies said.

Annual growth in factory output hit 3.9 percent in October, as expected in the Reuters poll and marking the biggest increase since December 2016.

The outlook for British manufacturing, which accounts for 10 percent of economic output, hinges largely on the outcome of Britain’s divorce from the European Union.

The European Commission said earlier on Friday enough progress had been made in Brexit negotiations with Britain to allow a second phase of talks on future relations to begin, ending an impasse over the status of the Irish border.

Broader industrial output was flat on the month, as expected. In annual terms, output was 3.6 percent higher in October, the strongest reading since December 2016.

Figures for the much bigger services sector are due to be released on Dec. 22.

The Bank of England said last month that it expects the economy to grow by 0.4 percent in the last three months of the year, and to expand by 1.6 percent in 2018, after it raised its key interest rate for the first time since 2007.

A private-sector business survey last week suggested British manufacturers enjoyed strong growth in November but also rising inflation pressure.

The official readings of manufacturing have tended to show a weaker picture for the sector than the surveys over 2017.

Separate ONS data again painted a mixed picture of Britain’s trade performance.

Although the ONS revised down the size of Britain’s trade deficit in the quarter, the figures showed the gap widened slightly in the month of October to 10.781 billion pounds from 10.453 billion pounds in September.

Economists polled by Reuters had expected a deficit of 11.45 billion pounds.

In volume terms, growth in exports outpaced that of imports during October.

Britain’s export performance has looked average this year compared with other European economies, suggesting sterling’s sharp fall after last year’s Brexit vote has yet to provide a major boost to competitiveness.

The ONS also released figures for construction in October, which disappointed again. Output dropped 1.7 percent on the month, following a 1.6 percent drop in October. This was the largest fall since March 2016.

The Reuters poll had suggested construction output would rise 0.4 percent.

However, new construction orders rose by a record amount in the third quarter, helped by the award of orders related to the new High Speed 2 rail project.

(Refiles to fix dateline)

(Reporting by Andy Bruce and Andrew MacAskill, editing by Larry King)

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