UK factories increased production by less than forecast in December, suggesting manufacturing is set for steady rather than runaway growth this year.

Output rose 0.3 per cent from November, the Office for National Statistics said today. That compares with the 0.6 per cent median of 26 estimates in a Bloomberg survey.

Industrial production, which also includes utilities and mines, climbed 0.4 per cent, also less than predicted.

While the UK economy expanded at the fastest rate since 2007 last year, industry surveys on services and manufacturing this week suggested the pace may have eased at the start of 2014.

The Bank of England kept its key policy rate at a record- low 0.5 per cent yesterday, while a report from the National Institute of Economic and Social Research today says consumer spending and a buoyant housing market will drive growth.

“The story from the industrial sector was a little disappointing,” said James Knightley, an economist at ING Bank NV in London. “The concern is that the manufacturing series is consistently undershooting what the business surveys are suggesting is happening.”

Industrial output, which accounts for 15 per cent of the economy, rose 0.5 per cent in the final three months of the year. That’s down from the 0.7 per cent previously estimated.

Statisticians said the revision removed less than 0.05 percentage point from gross domestic product growth of 0.7 per cent in the period.

Manufacturing, which makes up 10 per cent of the economy, grew 0.7 per cent in the fourth quarter compared with an initial estimate of 0.9 per cent. Industrial output was 12.3 per cent below its peak in the first quarter of 2008, while manufacturing was 8.8 per cent below.

Services, the largest part of the economy, have recovered all of the output lost during the recession.

The ONS said in a separate release that Britain’s goods- trade deficit narrowed to £7.7 billion in December, the smallest since July 2012, from £9.8 billion pounds in November.

Exports rose 1.9 per cent, boosted by shipments of oil, chemicals and aircraft. Imports fell 4.7 per cent, largely reflecting aircraft and ships.

Sales to the European Union, the destination for half of British exports, rose 2.7 per cent, while sales outside the 28-nation area rose 1.2 per cent.

The shortfall in trade in goods and services narrowed to £8 billion in the fourth quarter from £10.2 billion in the third, suggesting net trade contributed to growth after subtracting 1.2 percentage points in the third quarter.

In December, the total trade deficit fell to £1 billion from £3.6 billion, the biggest narrowing since records began in 1998. The surplus on services rose to £6.7 billion from £6.2 billion in November. The figures add to evidence that exporters are defying the strength of the pound, which has gained about 6 per cent on a trade-weighted basis since July 31st last year. (Bloomberg)