Business

Pound at five-year low against dollar on weak output

a welder works on a pipe on an oil rig Image copyright European Photopress Agency

The pound has fallen to its lowest level against the dollar for nearly five years on weak UK industrial output figures and uncertainty over the outcome of the election.

Sterling fell as low as $1.4618 before recovering slightly in late trading.

Earlier, the Office for National Statistics (ONS) said UK industrial output figures rose by just 0.1% in February from January.

The small increase was below analysts' forecasts for a 0.3% gain.

A number of opinion polls that showed Labour ahead of the Conservatives also unsettled traders.

One said the pound could fall far further if there were to be a prolonged struggle to form a government in the absence of a dominant party.

"A $1.40 level for sterling/dollar is certainly not out of reach if the election aftermath turns ugly," said Steve Barrow, currency strategist at Standard Bank.

Oil and gas production fell sharply, while the construction sector contracted by 0.9% in February, compared with forecasts for a rise of 2%.

The figures suggest the economy has slowed down this year, after a strong showing of 2.8% growth in 2014.

Manufacturing output showed the best growth within the industrial output measure, with a gain of 0.4% in February, bouncing back from its drop of 0.6% in January.

Chris Williamson, chief economist at Markit, said: "Clearly this all bodes ill for economic growth in the opening quarter of the year. It's now looking like the economy slowed, and possibly quite markedly, compared to the 0.6% expansion seen in the closing quarter of 2014.

"The trend should improve in March, however, according to survey data."

The ONS' industrial output data covers 14.6% of the UK economy.

The first official estimate of gross domestic product for the first quarter of the year will be released about a week before the general election.

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