UK factories in best growth run since '97 amid global upswing

London - UK manufacturers posted a seventh consecutive month of expansion in November as sectors from food producers to makers of games and sports equipment increased output.

Factory output rose 0.4% from October, the Office for National Statistics said on Wednesday. Overall industrial production also increased 0.4%, with a drop in temperatures boosting demand for energy.

Separate figures show construction output climbed 0.4%, and the trade deficit widened to £2.8bn.

Manufacturers are enjoying the longest run of uninterrupted growth since 1997 thanks to a broad-based global upswing, particularly in the euro area, which buys almost half of British exports.

It means industrial production, which accounts for 14% of GDP, almost certainly contributed to growth in the final quarter of 2017. Output rose by 1.2% in the latest three months, with manufacturing increasing 1.4%.

Ten out of 13 manufacturing sectors posted increased in November. A weak spot was car production, which plunged by 7.1% - the biggest decline since 2014 - after strong foreign demand in recent months.

Construction woes

But the smaller construction sector appears on course to shrink for a third straight quarter after a 1.1% decline in October, leaving industry executives pinning their hopes on budget initiatives announced by Chancellor of the Exchequer Philip Hammond to boost home building and get young people onto the property ladder.

The economy’s performance in 2018 will depend on the dominant services industry, which has come under pressure from inflation-squeezed consumers. Britain is forecast to join Italy and Japan at the bottom of the Group of Seven growth league this year, with an expansion of just 1.4%, Bloomberg surveys show.

The trade figures show exports of goods and services rose by 0.6% and imports gained 1.6%. While export volumes have far outstripped imports over the past year, higher import prices caused by the pound’s past depreciation are making it hard to reduce the deficit.

The goods shortfall excluding oil and erratic items stood at £32.7bn in the three months through November, just £1.5bn lower than a year earlier.

Net trade contributed nothing to GDP growth in the third quarter, and may fail to do so again in the fourth. The total deficit will widen unless December sees the shortfall narrow sharply to £763m.