Surprise pick-up in United Kingdom industrial output, but it's unlikely to last

Paterniano Del Favero
Agosto 10, 2017

Industrial output contracted by 0.4% in the three months to June, unchanged from an initial estimate by the Office for National Statistics that contributed to weak overall gross domestic product growth of 0.3% in the second quarter.

Overall manufacturing, which includes auto production but not oil, was flat on the month and in line with expectations.

Construction output dropped 0.1%, contracting for the third consecutive month, and fell 1.3% in the second quarter.

Factory output for exports increased, but not fast enough to offset the weak domestic demand, government statisticians said, a sign that a hoped-for rebalancing of the economy in the wake of the pound's steep depreciation a year ago has yet to materialize.

Britain's trade deficit in goods with the rest of the world widened unexpectedly in June, as export volumes suffered their sharpest monthly fall in a year, though looking at the quarter as a whole, export volumes are up by 5% on the year.

"Brexit pressures are still weighing on Mr Carney as exemplified in his recent Bank of England Minutes last week, but some solace should be taken as many PMI and Output figures are holding strong, recording figures higher than economists forecast", said Alex Lydall, head of dealing at Foenix Partners.

Based on the current figures, net trade made no contribition to economic growth in the second quarter, government statisticians said.

As accelerating inflation squeezes consumer spending-a key engine of United Kingdom growth-economists say that production and trade will have to do more heavy-lifting to stave off the already-evident economic slowdown.

The second-quarter economic growth was above the 0.2% growth seen in the preceeding three months, but still only less than a half of the 0.7% expansion seen at the end of previous year. Nonetheless, output grew 0.9% annually.

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