Oh dear.
Whatever happened to rebounding UK manufacturing on the UK's broad shoulders?
Sharp fall in manufacturing takes economists by surprise | The Times
Whatever happened to rebounding UK manufacturing on the UK's broad shoulders?
Sharp fall in manufacturing takes economists by surprise | The Times
Sharp fall in manufacturing takes economists by surprise
The Bombardier factory in Derby
The pound has tumbled against the dollar after manufacturing unexpectedly shrank in May, according to official figures that appeared to fly in the face of recent upbeat surveys.
Factory output fell 1.3 per cent between April and May, the first monthly fall since November and the steepest since January 2013, the Office for National Statistics said.
The surprisingly poor performance of manufacturing dragged down overall industrial production by 0.7 per cent.
Economists had expected industrial production to have grown at an annual rate of 3.2 per cent, but May’s disappointing performance meant the sector — which accounts for 15.2 per cent of national output — expanded by just 2.3 per cent over the year.
The pound slumped half a cent against the dollar on the news to $1.7089 in early trading.
Manufacturing, which represents a tenth of the economy, was expected to have enjoyed another healthy month after a series of surveys suggested the sector continued to expand.
May’s purchasing managers index, produced by Markit and the Chartered Institute of Purchasing and Supply, had edged lower but the reading – of 57 – suggested the industry was still growing very strongly.
Jake Trask, a corporate dealer at UKForex, said the weak official data had “caught the markets off-guard” and would provide another argument for the doves at the Bank of England “to hold fire on any UK interest rate rise this year and wait to the first quarter of 2015”.
The slump in manufacturing was across the board, with 10 of the 13 subsectors posting a monthly decline. Basic metals and metal products was one of the worst hit sectors, declining 2.3 per cent in a sign that the strength of the pound may have been partly to blame.
Policymakers have been fairly sanguine about the pound’s 10 per cent appreciation over the past year as manufacturers have weathered the rise with little ill effect. Basic steel and coal industries have suffered, though.
The pound hit a near six-year high earlier this month both against the trade-weighted index and the dollar. Jeremy Cook, chief economist at the currency company, World First, said: “The strong level of the pound may be starting to impinge on export orders.”
Basic pharmaceutical products pharmaceutical preparations saw a 3.6 per cent decline. The manufacture of computer, electronic and optical products fell 4.1 per cent.
Chris Williamson, chief economist at Markit, said: “These data certainly add more confusion to the policy debate as to whether the Bank should start raising interest rates later this year rather than delaying until next year and risk a steeper series of rate hikes.”
Economists said the surprise fall was unlikely to have much of an impact on growth forecasts for the second quarter, which range from 0.8 per cent to 1 per cent. David Tinsley, UK economist at BNP Paribas, said: “There is now some downside risk to our view that GDP can expand by 1 per cent.”
The Bombardier factory in Derby
The pound has tumbled against the dollar after manufacturing unexpectedly shrank in May, according to official figures that appeared to fly in the face of recent upbeat surveys.
Factory output fell 1.3 per cent between April and May, the first monthly fall since November and the steepest since January 2013, the Office for National Statistics said.
The surprisingly poor performance of manufacturing dragged down overall industrial production by 0.7 per cent.
Economists had expected industrial production to have grown at an annual rate of 3.2 per cent, but May’s disappointing performance meant the sector — which accounts for 15.2 per cent of national output — expanded by just 2.3 per cent over the year.
The pound slumped half a cent against the dollar on the news to $1.7089 in early trading.
Manufacturing, which represents a tenth of the economy, was expected to have enjoyed another healthy month after a series of surveys suggested the sector continued to expand.
May’s purchasing managers index, produced by Markit and the Chartered Institute of Purchasing and Supply, had edged lower but the reading – of 57 – suggested the industry was still growing very strongly.
Jake Trask, a corporate dealer at UKForex, said the weak official data had “caught the markets off-guard” and would provide another argument for the doves at the Bank of England “to hold fire on any UK interest rate rise this year and wait to the first quarter of 2015”.
The slump in manufacturing was across the board, with 10 of the 13 subsectors posting a monthly decline. Basic metals and metal products was one of the worst hit sectors, declining 2.3 per cent in a sign that the strength of the pound may have been partly to blame.
Policymakers have been fairly sanguine about the pound’s 10 per cent appreciation over the past year as manufacturers have weathered the rise with little ill effect. Basic steel and coal industries have suffered, though.
The pound hit a near six-year high earlier this month both against the trade-weighted index and the dollar. Jeremy Cook, chief economist at the currency company, World First, said: “The strong level of the pound may be starting to impinge on export orders.”
Basic pharmaceutical products pharmaceutical preparations saw a 3.6 per cent decline. The manufacture of computer, electronic and optical products fell 4.1 per cent.
Chris Williamson, chief economist at Markit, said: “These data certainly add more confusion to the policy debate as to whether the Bank should start raising interest rates later this year rather than delaying until next year and risk a steeper series of rate hikes.”
Economists said the surprise fall was unlikely to have much of an impact on growth forecasts for the second quarter, which range from 0.8 per cent to 1 per cent. David Tinsley, UK economist at BNP Paribas, said: “There is now some downside risk to our view that GDP can expand by 1 per cent.”
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