UK Manufacturers Enjoy Longest Run of Growth since the 1980’s and Solid Finish to 2017

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Friday’s data comes closely on the heels of the latest GDP numbers, which showed the UK economy regaining further lost momentum during the fourth quarter, with quarterly growth rising to 0.5%. 

The UK industrial sector saw a strong finish to the 2017 year, thanks in large part to continued strong growth among Britain’s manufacturers who have recently enjoyed their longest expansion since the late 1980's.

Total industrial production, which includes activity across manufacturing, construction, utilities and mining sectors, grew by 2.1% for the calendar year of 2017, according to Office for National Statistics figures released Friday

Industrial output was up by an even stronger clip of 2.3% for the three months to the end of December, when compared with the same period in the previous year, despite the sector seeing a 1.3% contraction in the December month due to a shutdown of the Forties oil pipeline in the North Sea.

The manufacturing industry was undoubtedly the star of the calendar year, fourth quarter and December month, with output rising 0.3% during the final month of the year, up from the 0.2% seen in November.

Factory production rose 1.3% in the fourth quarter overall and, for the calendar year, grew by 2.8%. This marks the eigth consecutive quarter of growth for UK manufacturers and the longest expansion since the period ending January 1988.

Meanwhile, on a further bright note, Britain’s beleaguered construction industry also showed signs of life in December. Output grew by 1.6% for the month when economists had expected it to be left sitting unchanged from November’s level.

“The 1.6% monthly rise in construction output was much stronger than the ONS had initially pencilled in alongside the preliminary estimate of GDP. As a result, it only contracted by 0.7% on the quarter, less than the 1% expected decline,” says Paul Hollingsworth, a senior UK economist at Capital Economics.

The industry still saw a fourth quarter contraction of -0.7% but, for the year overall, grew by 5.1%. This marks a positive finish to challenging year for UK construction firms.

After getting off to a strong start in the first quarter of 2017, which was the primary driver behind the annual expansion, the industry contracted for three consecutive quarters in a row. It is still technically mired in a recession.

Friday’s data comes closely on the heels of fourth quarter GDP numbers, which showed the economy growing 0.5%, up from the 0.4% seen in the third quarter. For the year overall, GDP growth was 1.8%, down by a fraction from the 1.9% seen in 2016.

“However, the whopping 1.3% monthly fall in industrial production (bigger than the 0.9% expected drop) means that quarterly growth in Q4 was revised down from 0.6% to 0.5%. None of these revisions were big enough to affect Q4’s GDP estimate,” Hollingsworth adds.

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