2016.09.0708:34:00UTC+00U.K. Manufacturing Output Logs Biggest Fall In A Year

The British manufacturing sector registered the biggest contraction in output in a year in July, while overall industrial production managed to expand on oil and gas extraction.

Manufacturing output shrank 0.9 percent in July from June on a sharp decline in pharmaceutical production, data from the Office for National Statistics showed Wednesday. Economists had expected output to drop moderately by 0.3 percent after easing 0.2 percent in June.

Nonetheless, industrial output gained 0.1 percent month-on-month in July after staying flat in June as the decline in manufacturing was negated by a rise in oil and gas.

The monthly increase was in contrast to a 0.2 percent fall economists had expected. Mining and quarrying output grew 4.7 percent.

IHS Global Insight economist Howard Archer said the fact that industrial production managed to eke out a minor gain in July lifts hopes that at the very least the sector will not be a significant drag on growth in the third quarter.

Archer said the drop in manufacturing may be the consequence of some work being delayed or postponed due to heightened uncertainty in the immediate aftermath of June's 'Brexit' vote.

Annual growth in industrial production improved to 2.1 percent in July from 1.4 percent in June. This was the fastest growth in three months and better than the expected increase of 1.9 percent.

Manufacturing output climbed 0.8 percent, following a 0.6 percent rise in June. Output was expected to climb 1.7 percent.

Despite July's weakness in manufacturing, Ruth Gregory, an economist at Capital Economics, still thinks that the overall economy is set for a period of slower growth, rather than a full-blown recession.

Survey results also suggested an improvement in economic activity after the initial shock of the 'Brexit' vote dissipated. According to the Purchasing Managers' survey, the dominant service sector returned to growth and the manufacturing sector rebounded in August helped by a weak sterling.