UK industrial sector ends 2016 strongly after performing better than expected in December

Britain's industrial sector performed much better than expected in December, with output growing across the majority of sectors, official data released on Friday (10 February) showed.

According to the Office for National Statistics (ONS), manufacturing production climbed 2.1% in December from the month before, compared with an upwardly revised 1.4% gain recorded in the previous month and beating analysts' expectations for a 0.5% increase.

On a year-on-year basis, production rose 4%, soaring past forecast for a 1.7% gain, while the previous month's figures was revised up from 1.2% to 1.7%.

The largest contribution to the bigger than expected gain came from pharmaceuticals, the ONS added.

Meanwhile, overall industrial production – a broader gauge of the industry – jumped 1.1 % in December, compared with an upwardly revised 2% increase recorded in November and surpassing analysts' expectations for growth to increase to 0.2%.

On an annual basis, meanwhile, industrial production rose 4.3% from the corresponding period in the previous year, compared with an upwardly revised 2.2% increase in the previous month and forecast for a 3.2% increase as output increased across all four main sectors.

Scott Bowman,UK economist at Capital Economics, said that despite the revisions, the sectors would still make negligible contributions to GDP growth in the fourth quarter. However, the latest set of figures hinted at a more balanced growth over the next 12 months.

"The December output figures do provide a base for more balanced growth in 2017," he said.

"Indeed, we think that the expansion in manufacturing activity will exceed that in services for the first time since 2011, as the manufacturing sector gets a competitive boost from the fall in the pound, but consumer services growth is constrained by rising inflation."

According to a survey released last week by IHS Markit Economics, Britain's manufacturing sector performed in line with expectations in January, but input costs grew at a record high.

Markit's Purchasing Managers' Index (PMI) declined from a two-and-a-half year-high of 56.1 in December to 55.9 last month, marking the sixth consecutive month of expansion and in line with analysts' expectations.