In December, industrial production rose by 1.1% (consensus 0.2%) and manufacturing by 2.1% (consensus 0.5%)
According to the ONS, total industrial production in the UK increased by 1.1 percent m-o-m in December 2016. This was far better than the consensus expectation of 0.2 percent. This followed an increase of 2.0 percent in the previous month (revised from 2.1 percent). Total production was buoyed by a broad-based increase in manufacturing. Pharmaceuticals (which can be erratic) provided the largest contribution to growth. Also, basic metals and other manufacturing and repair increased markedly in December. In total, manufacturing production increased 2.1 percent in December, beating consensus expectation of 0.5 percent. December numbers were also raised to show an increase in manufacturing production of 1.4 percent, from 1.3 percent earlier estimated. Outside of the manufacturing sector, the electricity, gas, steam and air conditioning sector provided the largest downward contribution to total industrial production. The Department for Business, Energy and Industrial Strategy (BEIS) suggested the unusually warm weather was contributing to the decrease.
Sentiment indicates growth will continue in 2017
Economic sentiment (PMI, CBI and EC) suggests output growth in manufacturing should continue in 2017 and remain around the level seen toward year-end 2016, i.e. an annual growth rate of around 3-4 percent. Further ahead, it remains to be seen how both export and domestic orders develop. The sentiment surveys have indicated strong domestic demand, while export orders have been a little softer than expected. This was due to increasing inflation taking some of the competitive advantage from the weakened GBP.