Factory rebound, energy use boost UK industry in February

By Olesya Dmitracova and Kate Holton

LONDON (Reuters) - British industrial output rose much more than expected in February, driven by a rebound in manufacturing and higher demand for energy during the unusually cold month, official data showed on Tuesday.

The improvement in industry, which late last year was the main drag on the economy, allays fears of another economic contraction in the January-March period, which would tip Britain into its third recession in less than five years.

The level of industrial output is now back to where it was in September, the ONS said.

Manufacturing output, which accounts for around a 10th of gross domestic product, climbed 0.8 percent on the month after a fall of 1.9 percent in January, the Office for National Statistics said.

The wider reading of industrial output, which includes energy production and mining, rose 1 percent after a 1.3 percent drop in January. Both increases beat by a wide margin economists' forecasts for tick-ups of 0.3 percent.

The pound rose against the dollar after the release.

"These apocalyptic stories of a Q1 negative (GDP) print and a triple dip are still certainly not guaranteed," said David Tinsley, economist at BNP Paribas. "If we get some growth in the service sector, we will be OK."

But he noted that, stripping out the weather impact, underlying growth was likely to have been weaker.

Industrial output was partially lifted in February by the biggest rise in the production of electricity and gas since October, with the average temperature during the month 0.9 degrees Celsius below the long-term norm.

CLOUDY OUTLOOK

The first official estimate of whether Britain's economy shrank again in the first quarter will be released on April 25.

Until then, the prospect of a triple-dip recession hangs in the balance. A survey of purchasing managers that showed a contraction in manufacturing activity in March fuelled that uncertainty.

Although there are signs that economic growth should pick up this year after two years of stagnation, Britain still needs support from more central bank asset purchases, Paul Fisher, a top Bank of England official, told a newspaper.

A separate survey out overnight showed that the central bank's lending scheme was helping Britain's housing market, with sales at their highest level in three years and prices broadly stable.

Resilience in the retail sector adds to optimism, as sales continued growing in March despite a hit from cold weather.

However, ONS data also released on Tuesday showed that Britain's goods trade deficit grew much more than expected in February, weakened by sluggish exports to the European Union.

The gap reached 9.416 billion pounds - its biggest since August.

(Editing by Catherine Evans)

Source: http://news.yahoo.com/factory-rebound-energy-boost-february-industrial-output-083523223--business.html

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