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A plaque depicting Britannia is seen on the outside of the Bank of England in the City of London February 4, 2010. (TOBY MELVILLE/REUTERS)
A plaque depicting Britannia is seen on the outside of the Bank of England in the City of London February 4, 2010. (TOBY MELVILLE/REUTERS)

Surprise drop in U.K. factory output endangers recovery Add to ...

British factory output suffered its biggest monthly fall in almost a year in February, confounding upbeat private-sector surveys and casting doubt on the health of the country’s economic recovery.

The economy shrank at the end of 2011, ensuring the Bank of England bolstered its quantitative easing gilt purchases in February, a decision it looks set to stick with when it concludes its April policy meeting later on Thursday.

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Economic news since the start of the year had been better, and the purchasing managers’ indices (PMIs) pointed to first-quarter growth of as much as 0.5 per cent.

However, the Office for National Statistics said that manufacturing output slumped by 1.0 per cent in February after a January’s figures were revised downwards to show a drop of 0.3 per cent, giving an annual decline of 1.4 per cent.

This is much worse than economists’ forecasts of an increase of 0.1 per cent for both measures, and gives the lowest total amount of factory output since July 2010. The fall in factory output was the biggest monthly drop since April 2011, when an extra public holiday disrupted activity.

Cold weather in February after a mild December and January boosted both oil and gas production and electricity generation, lifting the broader industrial output measure to show monthly growth of 0.4 per cent - roughly in line with forecasts.

Recent private-sector surveys had shown a strengthening in the manufacturing sector. March’s factory PMI rose to a 10-month high after suggesting modest growth in February, while the British Chambers of Commerce first-quarter survey showed the strongest growth in factory orders and sales since Q2 2011.

Manufacturing output in the three months to February was up 0.2 per cent, its biggest rise since July 2011, helped by a strong December.

Oil and gas output jumped by 4.6 per cent in February - its biggest rise since March 2010 - but is still 10.7 per cent down on a year ago. Output is likely to continue to be weak, after a gas leak at a North Sea oil platform operated by Total last week that has caused significant shutdowns and may take months to fix.

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