UK industrial production beats expectations, grows fastest since 2012

Data released on Wednesday by the Office for National Statistics (ONS) showed that UK industrial production increased 2 percent m/m in April compared with a 0.3 percent gain in March beating analysts’ expectations for an unchanged reading. Industrial production over the last three months has improved 0.7 percent compared to the previous three months, the ONS said.

Details showed that manufacturing production surged 2.3 per cent m/m in April and 0.8 per cent y/y, boosted in particular by the pharmaceuticals sector which showed a 12.5 pct y/y rise, the biggest since April 2009.

“As such, relative to the drag from the industrial sector seen over Q1 – when output shrank by an estimated 0.5 percent q/q – today’s data hold the prospect of a boost to overall economic activity in Q2,” said Lloyds Bank in a report.

It was the biggest m/m jump since July 2012 and defied expectations that the sector was stagnating heading into the EU membership referendum which has been weighing on economic growth in the second quarter. Today’s release comes as a major surprise, with industrial sentiment indicators – notably the PMI and CBI surveys – not pointing to any marked pickup in manufacturing activity at the onset of Q2.

Analysts are still sceptical that UK's industrial sector had turned a corner. UK manufacturing sector remains 6.4 percent below its pre-crisis peak and currently accounts for approximately 10 percent of British economic output.

"Manufacturers will be hit by a rising pound after a Remain vote, or lower business investment after Brexit. With surveys of manufacturers continuing to point to falling production, it’s simply too soon to conclude that April’s data mark a turning point in the industrial sector’s decline,” said Samuel Tombs, chief UK economist at Pantheon Macroeconomics.