U.K. Industrial Output Falls Unexpectedly; Visible Trade Gap Widens

(RTTNews) - U.K. industrial production logged an unexpected drop in August on weak oil and gas extraction, while the fall in sterling underpinned manufacturing output.

Industrial output fell 0.4 percent on a monthly basis, in contrast to a 0.1 percent rise seen in July, figures from the Office for National Statistics showed Friday. Economists had forecast a 0.1 percent rise for August.

Meanwhile, manufacturing output grew 0.2 percent, reversing a 0.9 percent drop in July. Nonetheless, the pace of growth was slower than an expected 0.4 percent increase.

British car manufacturers lifted their production to meet foreign demand.

On a yearly basis, growth in industrial output eased less-than-expected to 0.7 percent from 2.1 percent. The expected rate of growth was 1.3 percent.

Manufacturing output climbed 0.5 percent. Economists had forecast a 0.8 percent gain in manufacturing.

While August's industrial production and trade data provided a break from the recent run of positive data, the economy still appeared to weather the Brexit vote better than most expected in the third quarter, Scott Bowman, economist at Capital Economics, said.

Another report from ONS today revealed that the visible trade deficit widened to GBP 12.1 billion in August from GBP 9.5 billion in July.

The increase reflected an increase in exports of GBP 0.1 billion to GBP 25.8 billion and a rise in imports of GBP 2.7 billion to GBP 37.9 billion.

Meanwhile, the surplus on services rose to GBP 7.4 billion from GBP 7.3 billion a month ago. As a result, the total trade deficit increased to GBP 4.7 billion from GBP 2.2 billion.

August's dip in industrial production and the wider trade deficit have dented expectations of the likely third quarter growth outturn, IHS Global Insight Economist Howard Archer noted.

Following the remarks of French President Francois Hollande about "hard exit" negotiations, the sterling declined sharply today to a set a new 31-year low and marked its biggest fall since the Brexit vote.