UK industrial production in surprise drop in Feb.

[April 06, 2011]  LONDON (AP) -- British industrial production fell 1.2 percent in February from January, an official report said Wednesday, marking the largest monthly fall since August 2009 and far worse than analyst expectations for an increase of 0.2 percent.

The Office for National Statistics said a 7.8 percent drop in oil and gas extraction was the main reason for the fall, while the manufacturing sector was flat.

For the December-February period, overall industrial production was up 0.8 percent compared with the previous three months, while manufacturing output was up 1.1 percent.

"It may be that the industrial recovery is past its peak," said Samuel Tombs, U.K. economist at Capital Economics.

Industrial production accounts for 17 percent of British GDP.

"While not too much should be read into one month's data, especially following a strong gain the previous months, the stagnation in output in February will fuel concern that the manufacturing sector may be starting to come off the boil," said Howard Archer, chief European economist at IHS Global Insight.

The report coincided with the effective date of a mix of new tax measures which are expected to affect U.K. consumer spending.

Prime Minister David Cameron's government said 80 percent of taxpayers would be better off while the impact would be felt by the top 20 percent of earners.

The opposition Labour Party, however, produced figures claiming that a family with three children and an income of 52,000 pounds ($84,800) a year would be 1,700 pounds worse off from the combined effect of Wednesday's changes and the Jan. 1 rise in sales tax from 17.5 percent to 20 percent.

Meanwhile, the Society of Motor Manufacturers and Traders said registrations of new cars fell by 7.9 percent in March compared to a year ago, and total registrations in the first quarter was down by 8.7 percent.

Sales had been boosted last year by government-backed incentives to new car buyers who traded in a car more than 10 years old.

The Society expects new car registrations this year to finish 5 percent below 2010 levels.

Japanese carmaker Honda announced Wednesday that it plans to cut production at its U.K. factory by 50 percent from April 11. The company said the cutback follows interruptions in its supply chain caused by the earthquake and tsunami in Japan.

Unite, the union which represent workers at Honda, said the company agreed that pay would not be cut during the slowdown. The production cut will continue to the end of May, said Unite regional officer Jim D'Avila.

[Associated Press]

Copyright 2011 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.