UK industrial production missed expectations and looks feeble

Osborne factoryREUTERS/Christopher FurlongChancellor George Osborne inspects a factory.

Industrial production dropped unexpectedly in December, falling 0.2% on the month, and up just 0.5% on the year.

Economists had expected a 0.1% boost in production between November and December, which would have left production overall up just 0.7% from the same point in 2013.

Manufacturing production is stronger, up 2.4% year-on-year.

Industrial production overall includes mining activities, which include north sea oil extraction. Extraction has been tumbling for years, but the falling price of oil has likely exacerbated that.

Paul Hollingsworth at Capital Economics thinks that plunging energy prices should cause a boost for manufacturers in the next few months:

The fall in oil prices looks set to provide some timely stimulus to the sector’s recovery soon. Indeed, through lowering firms’ costs it could make some production lines profitable again, and the boost to consumers’ spending power should ensure that domestic demand remains robust. Granted, oil prices have rebounded over the few weeks from around $US45 to around $US57. But the bigger picture is that they remain around half the level seen last summer.

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