UK industrial output unexpectedly dropped in January

British industrial output dropped by a monthly 0.1 percent in January, according to official figures.

The drop was largely due to underperforming information technology and machinery sectors.

According to a Reuters poll, analysts had forecast a 0.2 increase in industrial output.

Manufacturing output dropped by 0.5 percent in January compared to the month before, said the Office for National Statistics.

The high-tech industry pulled industrial output right down in January.

The ONS said that the biggest fall was in the computer, electronic and optical sector, with output in the sector dropping by 9.5 percent – the biggest monthly fall in over a decade.

The Sterling fell against the dollar to $1.50 after the figures were announced.

Jameel Ahmad, chief market analyst at FXTM, said:

“The industrial production number coming in below expectations has softened some of the optimism that UK economic momentum had gathered since the start of the year. With the UK election looming, I do not personally think sterling/dollar has bottomed out.”

Chris Williamson, chief UK economist at financial data provider Markit, said that the drop was largely due to an unexpected plunge in hi-tech equipment output, adding that people should not “read too much” into the decline.

He said:

“The data are clearly volatile, and it would be dangerous to read too much into the decline. Encouragingly, the less volatile three-month trend showed manufacturing output growth picking up 0.4% in January from 0.3% in December.”

 

Construction also hit hard

Another sector that was hit hard was construction.

Construction output for January fell by 2.6 percent, well below what the Office for National Statistics (ONS) had expected of a further increase of 1.2 percent.

While new housebuilding dropped by five percent – the biggest decline since February last year.

However, Chris Temple, PwC engineering and construction consultant, said:

“Despite these latest figures, we continue to expect the sector to show solid, healthy growth during 2015. As we approach the general election, it is possible that we will see a further temporary slowdown in new orders”