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British industrial production, trade figures mixed: economists

English.news.cn   2013-12-11 07:17:51            

LONDON, Dec. 10 (Xinhua) -- Figures released Tuesday showed that British manufacturing and industrial production rose in October in line with expectations, but the British trade deficit continued to disappoint, according to economists.

Industrial production rose for the second month running, with manufacturing output growing 0.4 percent month-on-month in October, in line with consensus forecasts. September's figures was revised down slightly to 0.7 percent from a previous 0.8 percent.

Overall, British industrial production was also up 0.4 percent.

Manufacturing was the chief contributor to monthly industrial production growth, but both mining and quarrying were weaker.

HSBC British economist John Zhu said, "While domestic consumption has been driving growth, investment remains depressed and it is far from certain that consumers can continue to increase spending without taking on more debt."

"Unless real wages or external demand start to rise, the question could then turn to whether the central bank can actually engineer a soft landing for the UK consumer," he added.

The British trade deficit in goods widened and disappointed expectations again, rising to 9.7 billion pounds (15.9 billion U.S. dollars), offset by a surplus in services of 7.1 billion pounds, leaving total trade balance little changed at 2.6 billion pounds.

The trade balance with non-EU countries improved to a deficit of 3.3 billion pounds from 3.9 billion pounds previously.

A fall in oil exports of 11.7 percent was one of the main contributors to the widening deficit.

Blerina Uruci, British economist at Barclays Economics Research, said the weakness in exports to non-EU countries raises concerns about the competitiveness of exporters.

"It does not bode well for the overall trade position. Meanwhile, imports are set to rise as domestic demand consolidates and we expect net trade not to provide significant support to the recovery in the coming quarters," said Uruci.

Zhu said the industrial production figures matched with not-so-good export figures cast some doubt on the ability of the economic recovery to continue at its current pace.

He added the recovery in output without a corresponding increase in exports suggested an increasing proportion of output was consumed domestically.

"This is not bad per se, except that the UK consumer seems to be making up much of final demand given the still-depressed investment data. This may not be sustainable given the still-negative rate of real earnings growth -- that is unless household leverage is increasing," Zhu said.

David Kern, chief economist at the industry body British Chambers of Commerce, said the figures showed continued growth in the economy. He warned, "Though manufacturing is recovering, output is almost 9 percent below its pre-crisis level. The share of manufacturing in the economy has fallen considerably in recent years but the sector has maintained its skills base during the downturn and there is scope for improvement in the future."

Kern said there was still a large trade deficit and more should be done to rebalance the economy towards net exports.

In addition, problems in the eurozone remained a major challenge for exporters.

"This shows there is a need to diversify our trade efforts towards other areas of the economy. British businesses want to drive the recovery, but the government must do more to help by introducing policies that will boost growth and by ensuring there is enough support for firms looking to export," he said.

Editor: An
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