FXstreet.com (Barcelona) - Vicky Redwood, Chief UK Economist at
Capital Economics notes that November's disappointing UK industrial
production and construction figures provided yet more evidence that
the economy probably contracted in the fourth quarter of last year.
She comments that although overall production posted a 0.3% monthly
rise, this just reflected a bounce-back in the energy sector as a
North Sea oil field re opened after an extended maintenance shut
down. In fact, both we and the consensus had expected a bigger rise
in industrial production as a result of this.
Redwood notes that Manufacturing output fell by 0.3%, the fourth
consecutive month of flat or falling output. It now stands 2% lower
than a year ago and is no higher than it was towards the start of
2010. Production of consumer goods led the fall. She continues to
write, "The improvement in the CIPS/Markit report on manufacturing
in December suggests that the end of 2012 may have finished on a
slightly better note. But the survey is consistent with only flat
output."
Further, she adds that even if production showed a decent rise in
December, it still looks likely to have contracted by close to 2%
in Q4 as a whole (compared to a 0.7% rise in Q3). On its own, this
would knock about 0.3 percentages points off GDP growth in Q4.
What's more, today's construction figures also showed a monthly
fall in November, of 3.4% - although data are volatile and not
seasonally adjusted, so she advises not reading too much into them.
Overall, "it is looking even more likely that the first estimate of
Q4 GDP released on 25th January will show a fall (although you
should never underestimate the ability of the ONS to surprise us!).
Some better news came from today's interest rate data from the Bank
of England. New fixed mortgage rates fell by a further 10bps or so
in December, providing more evidence that the Funding for Lending
Scheme is starting to work. However, it may yet be a while before
lending starts to increase a result, if indeed it rises at
all."