Industrial production figures for October have delivered a “significant and unexpected blow” to UK fourth quarter GDP growth prospects.
It nosedived 1.3 per cent – the sharpest monthly drop since September 2012.
Manufacturing fell 0.9 per cent following an increase of 0.6 per cent a month prior.
The drop was magnified by a 10.8 per cent drop in oil and gas extraction due to the temporary shutdown of the Buzzard oilfield.
However, IHS Markit UK and Europe chief economist Howard Archer says even with a bounce back as the oilfield comes back into operation Q4 growth forecasts look set to take a hit.
Until the figures were released he had forecast Q4 GDP growth of 0.5 per cent. Archer says he will likely trim his forecast to 0.4 per cent, but says much depends on the services sector and the strength of retail sales over Christmas.
“October’s 1.3 per cent drop in industrial production puts a significant dent in fourth quarter growth prospects as it will now looks odds-on that the sector will contract in the fourth quarter and possibly markedly – even allowing for the fact that there could be a marked bounce back in oil and gas extraction as the oilfield comes back into operation.
“While industrial production only accounts for 14.6 per cent of total output, contraction would be a blow.”
Nine out of 13 manufacturing sectors saw output fall in October. Pharmaceuticals were particularly hard hit with a 3.6 per cent drop.