British industry looks set to grow more strongly this year

LONDON: British industry grew faster than expected in September as a major oil field came back on stream and car production rebounded, a positive end to an otherwise soft third quarter for production.

Thursday’s official data showed industrial output rose 0.6 percent in September from August, the biggest increase since February and beating a Reuters poll forecast for growth of 0.4 percent.

Much of the upturn was driven by production restarting at the major Buzzard offshore field in the North Sea and at other installations, as oil and gas extraction rose at its fastest pace in seven months.

Britain looks set to grow more strongly than other big industrialized economies this year. But the recovery has been largely reliant on consumer spending and business investment has only recently started to pick up, raising questions about the long-term sustainability of the upturn.

Despite September’s rebound, the Office for National Statistics revised down its third quarter estimate for industrial output growth to 0.2 percent from 0.5 percent, in part due to lower estimates of electricity generation.

But that had little bearing on its estimate for economic growth of 0.7 percent in the July-September period.

“The picture is one of a mild rather than sharp slowdown, with the UK so far riding out weaker growth in the euro zone relatively well,” Berenberg chief UK economist Rob Wood said.

Financial markets showed little reaction to the data, with investors focused on policy decisions due later from the Bank of England and the European Central Bank.

British manufacturing output in September rose 0.4 percent, slightly more than the Reuters poll consensus of 0.3 percent, helped by a return to production at car plants which shut down for longer than usual over the summer.

One business survey this week showed British manufacturing surged unexpectedly in October, as domestic demand helped factories overcome the worst fall in export orders since January 2013.

Underlining the weakness of demand in Britain’s biggest trading partner, the euro zone, German industrial orders rose far less than expected in September, according to data earlier on Thursday.

Manufacturing has further to go to catch up on its deep slump after the 2008 financial crisis. Factory output is still 4.1 percent below its peak, while services sector output is already well above pre-crisis levels. But for now, Britain’s domestic market looks in good shape.

British new car sales passed the 2 million mark in October, earlier in the year than any time since 2007, industry data showed on Thursday.

The Bank of England has said it wants to be sure growth is on a firm basis before it raises interest rates from their record-low 0.5 percent, however, and markets have pushed out the expected timing of a first rate rise after weaker recent data.

The Bank of England voted on Thursday to maintain its key interest rate at a record-low level of 0.50 percent.

The central bank’s nine-member monetary policy committee (MPC) decided also to keep the level of its cash stimulus, or quantitative easing, at £375 billion ($602 billion, 474 billion euros), the BoE said in a statement issued after a monthly meeting.

“The Bank of England’s MPC ... today voted to maintain bank rate at 0.5 percent,” it said in the statement.

“The Committee also voted to maintain the stock of purchased assets financed by the issuance of central bank reserves at £375 billion.”