UK Industrial Production Shows Choppy Decline 

THE TAKEAWAY: UK industrial production declines 0.5%, as expected -> Weak production comes as a possible sign of poor economic growth -> Sterling trading lower in today’s session

UK industrial production continued to show choppy results in August, when production fell from 2.8% growth (revised) in July to a 0.5% decline. The decline in industrial production was as expected, but the annual 1.2% decline in industrial production was slightly more than expectations for a 1.1% drop.

UK manufacturing production was also volatile according to the release from the UK Office for National Statistics. Factory production declined 1.1% in August, following July’s 3.1% rise in manufacturing. The drop was worse than the expected 0.7% decline in factory production.

Industrial production could be seen as one of the signs of general economic performance, and declining production might suggest a lower GDP for the quarter. The UK economy shrank for the third straight quarter in 2Q, down 0.4% from Q1. GBP investors are looking for a sign of positive growth and an end to the technical recession in the UK.

The British Pound did not significantly react to the weak manufacturing numbers, but continued to trade slightly above 1.6010 against the US Dollar. Earlier in the day, Sterling mimicked the Euro’s decline against the USD in anticipation and at the onset of ECB President Draghi’s speech to the European parliament. GBPUSD set a new monthly low, but did not break below the 1.6000 possible support.

GBPUSD 15-minute: October 2, 2012

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