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UK Industrial Production Sees Signs of Recovery Despite Quarterly Losses

Benjamin Spier

THE TAKEAWAY: UK industrial production rises 1.1% in December -> UK trade balance increases to -3.201 billion Pounds -> Sterling rises slightly

UK Industrial Production increased for the second straight month in December, rising 1.1% from the previous month. The production was better than expectations for a 0.9% rise and November’s revised 0.2% increase in industrial output. Industrial production was 1.7% less than December 2011, and manufacturing production rose 1.6% in December, according to the Office for National Statistics. Industrial production fell 1.9% over the fourth quarter, which was the largest quarterly drop since Q1 of 2009.

Also in December, the UK trade balance rose to -3.201 billion Pounds, which was slightly worse than expectations for a 3.2 billion deficit and better than November’s revised -3.577 billion trade balance. Goods trade saw a deficit of 8.9 billion Pounds, while the trade of services saw a 3.2 billion surplus in December. The trade balance outside of the European Union was slightly worse than the total balance, at 4.239 billion Pounds.

The UK economy declined 0.3% in Q4, and is now one quarter away from a technical triple dip recession. The quarterly decline in manufacturing falls in line with the overall economic decline that quarter, but the improved manufacturing in December may support those who think the UK economy will return to growth in 2013. BoE Governor King recently predicted that the UK economy will recover well into 2013. Signs of economic recovery in the UK are Pound positive.

However, the Pound only saw a small rise against the US Dollar following the manufacturing release. At the time of this writing, the British Pound is trading around 1.5700 against USD in Forex markets. GBP/USD may see a lot of volatility in today’s session because of the BoE’s upcoming asset purchase target decision, and BoE Governor-Designate Carney’s appearance before UK lawmakers. The pair may see resistance by a resistance line around 1.5750 and support by a recent 5-month low around 1.5630.

GBPUSD Daily: February 7, 2013

UK_Industrial_Production_Sees_Signs_of_Recovery_Despite_Quarterly_Losses_body_gbpusd.png, UK Industrial Production Sees Signs of Recovery Despite Quarterly Losses

Chart created by Benjamin Spier using Marketscope 2.0

-- Written by Benjamin Spier, DailyFX Research. Feedback can be sent to bbspier@fxcm.com .

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