UK industry surges, construction and trade muddy outlook
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[December 08, 2017]
By Andy Bruce and Andrew MacAskill
LONDON (Reuters) - British industry
expanded in October at its fastest annual pace in almost a year,
although a downturn in construction and a mixed trade performance left
analysts split about the outlook for the economy in 2018.
Britain's economy has lost momentum this year as consumers suffered from
higher inflation triggered by sterling's fall after last year's Brexit
vote - though some exporters have gained from the weaker pound and the
stronger euro zone economy.
Industrial output was 3.6 percent higher in October than a year ago, the
biggest jump since December last year and broadly as expected by
economists in a Reuters poll, official data showed on Friday.
But in October alone, there was no growth in industrial production and
only a 0.1 percent increase in its factory output component, the Office
for National Statistics said.

Economists were divided over the data, which also showed the sharpest
one-month drop in construction output since March 2016.
Andrew Sentance, senior economic adviser at PwC and a former Bank of
England rate-setter, said the figures were positive.
Others focused on the lackluster monthly performance of industry and
construction.
"Decent manufacturing and trade data, alongside a continued recession in
construction, underscore the variation of UK growth between different
sectors," HSBC economist Chris Hare said.
Economists at Barclays said weak industry and construction pointed to a
0.1 percentage-point drag on economic growth in the fourth quarter.
The Bank of England said last month that it expects the economy to grow
by 0.4 percent in the last three months of the year and to expand by 1.6
percent in 2018, after it raised its key interest rate for the first
time since 2007.
Business surveys show factories are enjoying demand from a surging
European economy, but also face an increase in price pressures.
A separate BoE survey on Friday showed that the British public expects
inflation to overshoot its target by the most since 2013 in coming
years.
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New Toyota cars are transported from their manufacturing facility in
Burnaston, Britain March 16, 2017. REUTERS/Darren Staples/File Photo

WATCHING BREXIT
The outcome of Britain's split from the European Union is crucial to the outlook
for manufacturers, who account for 10 percent of economic output.
The European Commission said on Friday enough progress had been made in Brexit
negotiations to allow a second phase of talks on future relations to begin,
ending an impasse over the status of the Irish border.
That should hearten British exporters, although they are still waiting on
details of a Brexit transition deal and trade agreements.
"We need to pin down the transition arrangements ... to ensure it's business as
usual for companies for as long as it takes until a final deal is reached. Until
we get to that point, many businesses will need to prepare for any and every
eventuality," said Stephen Phipson, chief executive of the EEF manufacturers
association.
The ONS said car production was a bright spot for the economy in October, helped
by strong export demand.
Separate figures showed Britain's goods trade deficit in the three months to
September was smaller than first thought, though the gap widened slightly in
October to 10.8 billion pounds ($14.5 billion) from September's 10.5 billion
pounds.
Still, exports in volume terms outpaced imports, helped by a resurgent European
market.

ONS figures on construction disappointed again. Output dropped 1.7 percent on
the month, worse than all forecasts in a Reuters poll.
However, the downturn may ease in future months. New construction orders rose by
a record amount in the third quarter, boosted by the new High Speed 2 rail
project.
(Reporting by Andy Bruce and Andrew MacAskill, editing by Larry King)
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