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U.K. Industrial Production Holds Steady; Manufacturing Slows

U.K. Industrial Production Holds Steady; Manufacturing Slows
9/6/2013 6:34 AM ET

Industrial production in the U.K. stagnated in July after a notable improvement in June, while growth in manufacturing sector slowed, data from the Office for National Statistics showed Friday.

Meanwhile, the performance of the trade sector in July was disappointing as exports declined, leading to a bigger-than-expected trade deficit.

Industrial production remained unchanged in July from June in contrast to forecasts of 0.2 percent increase. This comes after a strong 1.3 percent expansion.

Manufacturing production increased for a second consecutive month, growing 0.2 percent over the same period, in line with expectations. The gain was weaker than a 2 percent increase recorded in June.

"The industrial production data are actually still very respectable," Howard Archer, Chief European and UK Economist at IHS Global Insight. "A marked drop in energy supply held back industrial production in July reflecting the very warm weather," the economist noted.

Energy output fell 0.3 percent between June and July. Production and supply of electricity, gas, steam and air conditioning slipped 2.2 percent. Mining and quarrying was also down, by 0.5 percent on a monthly basis.

Overall production declined 1.6 percent year-on-year in July, reversing a 1.4 percent increase in June. This compares with forecast for a 1.7 percent fall. Manufacturing output slipped 0.7 percent as expected during the month. In June, factory production recorded a growth of 2.1 percent.

Separately, the statistical agency reported that the U.K.'s external trade in goods resulted in a higher deficit in July than a month earlier. The shortfall in July amounted to GBP 9.9 billion, compared with GBP 8.2 billion recorded in June.

Exports of goods fell 7.6 percent month-on-month to GBP 24.8 billion in July. Imports for the same period fell 1 percent to GBP 34.7 billion.

The deficit on the U.K.'s overall foreign trade increased to GBP 3.1 billion in July from GBP 1.3 billion in the prior month. Total exports declined 4.6 percent month-on-month in July. Imports slipped 0.4 percent.

The balance of trade in services was in a surplus of GBP 6.8 billion, slightly down from GBP 6.9 billion in June.

Exports of goods to countries outside of the EU decreased by GBP 2.2 billion from June to GBP 11.8 billion in July. Exports to countries within the EU, meanwhile, rose by GBP 0.2 billion over the same period to GBP 13 billion.

The drop in exports "was concerning", Samuel Tombs, UK economist at Capital Economics said. "It seems as if the slowdown in growth in emerging markets sapped demand for UK exports."

"The fact that many emerging market currencies have depreciated sharply since July, thus reducing the competitiveness of UK exports, suggests that further falls in exports to those regions may be in store," Tombs added.

Meanwhile, results of a key survey from the Bank of England revealed Friday that the proportion of Britons' expecting an interest rate hike in the next 12 months was the lowest since 2008. Consumers' inflation expectations have eased from May, the survey found.

Earlier today, a report from the Lloyds Banking Group's Halifax division showed that residential property prices in the country increased at a slower rate in August. The house price index moved up a seasonally adjusted 0.4 percent month-on-month in August, slower than the 0.9 percent rise recorded a month earlier.

Relatively modest economic growth and below-inflation rises in earnings are likely to act as a brake on the market, Halifax housing economist Martin Ellis said. "Overall, house prices are expected to rise gradually over the remainder of the year," Ellis added.

by RTT Staff Writer

For comments and feedback: editorial@rttnews.com

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