* UK factory output drops 0.9 pct in July, biggest drop in a
* First economic output data since June's Brexit vote
* Sterling slips, market focuses on gloomy factory data
(Adds reaction, detail)
By Andy Bruce and William Schomberg
LONDON, Sept 7 British manufacturing output fell
in July at the fastest pace in a year, confirming earlier signs
that factories took an immediate hit after the vote to leave the
European Union, official data showed on Wednesday.
Overall industrial output unexpectedly rose thanks to strong
oil and gas production, boosting the chances that Britain's
economy, while slowing, will avoid a recession.
But sterling slipped after the figures which the Bank of
England will see as consistent with its view that the economy is
likely to slow sharply in the second half of 2016. BoE Governor
Mark Carney is due to speak to lawmakers at 1315 GMT.
Manufacturing output fell by a sharper-than-expected 0.9
percent in July following a 0.2 percent drop in June, the Office
for National Statistics said.
The official figures are the first to cover economic output
solely for the period after the June 23 Brexit vote. Britain was
plunged into political chaos in July by the referendum result
before Theresa May took over as prime minister.
"We maintain our view that UK industrial production and
manufacturing remain a cause for concern," said economists
Andrzej Szczepaniak and Fabrice Montagne at Barclays.
A deep-seated lack of competitiveness in British
manufacturing would be aggravated by doubts about the country's
future trading ties if the government delays starting the formal
process of leaving the EU, they said.
May has said she will not start the process this year to
give Britain time to prepare its exit strategy but she has also
said it would not be "kicked into the long grass."
Data released earlier on Wednesday showed German industrial
output posted its steepest fall in 23 months in July. Economists
said the German figures probably reflected concerns about the
consequences of Britain's decision to leave the EU.
Despite the hit in July, there have been signs of a rebound
in Britain's economy. A closely watched survey by financial data
company Markit, published earlier this month, suggested
manufacturing, which makes up about 10 percent of the economy,
jumped in August. There was a similar result in a survey of the
dominant services sector.
The ONS said on Wednesday that overall industrial output in
July unexpectedly rose 0.1 percent on the month after stagnating
in June, helped by oil and gas. Economists polled by Reuters had
expected it to edge down 0.2 percent.
Oil production was boosted by continued output at the
Buzzard field in the North Sea which usually shuts down for
maintenance in July but which will occur in September this year.
Pharmaceuticals, which are often volatile, represented the
main drag on manufacturing, but many other sectors fell too.
The ONS said there was no sign of manufacturers getting an
immediate boost from sterling's plunge since the Brexit vote as
contracts are usually slow to respond to currency fluctuations.
Other private sector surveys have suggested manufacturers
have benefitted the pound's plunge since June which has boosted
export orders. However, there are also signs that import costs
are rising fast - something that will squeeze profit margins,
boost inflation and eat into spending power of consumers.
(Editing by Toby Chopra)