Industrial output drops in June

<p>A drop in oil, gas and mining production led to an 0.4 per cent fall in UK industrial output.</p>

The UK's industrial output dropped in June.

According to figures from the Office for National Statistics (ONS), the fall was 0.4 per cent for the month. This followed a slip in oil, gas and mining production and the ONS blamed part of the fall on maintenance in a major oil field.

Despite the drop, total production output is thought to have increased by 1.5 per cent compared to a year ago.

Manufacturing performance "mediocre"

There has been positive movement in the manufacturing sector, which saw an 0.2 per cent increase in June. This indicates some recovery from May, when manufacturing dropped by 0.6 per cent.

Weak demand from Europe, the strength of the pound and sluggish investment have all meant that UK manufacturing has struggled this year.

Although manufacturing has seen growth, David Kern, chief economist at the British Cambers of Commerce called the performance "mediocre".

He noted that output is still significantly less than it was prior to the financial crisis.

"Year-on-year growth is below one per cent and the level of manufacturing output is still almost five per cent below its pre-recession peak in the first quarter of 2008," he told the BBC.

Economist Chris Williamson agrees. He believes that, although there has been a recent rise in manufacturing output, overall outlook is subdued.

"The much-vaunted UK manufacturing revival remains a distant policymakers' dream rather than a reality and the UK economy remains clearly reliant on the service sector as its primary source of growth," he explained.

He indicated that the Bank of England's Monetary Policy Committee (MPC) would find it difficult to decide when to raise interest rates – and this was demonstrated on Thursday (August 6th) when the MPC voted 8-1 to keep rates flat. This was the first time in months the committee hasn't made a unanimous decision in regards to a rate increase.

"The weakness of the [manufacturing] sector presents policymakers with a difficult decision as to whether a surging service sector justifies hiking interest rates or whether growth needs to be more balanced before the economy can safely withstand a tightening of monetary policy," Mr Williamson said.

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