Weak UK industrial production points to Q2 GDP growth of 0.3%

Manufacturing and construction sectors 'weak' in May, trade deficit widens

UK manufacturing output falls in May

The manufacturing figures were hit by a 4.4 percent drop on the month in motor vehicle output, the biggest fall in over a year.

United Kingdom industrial production declined 0.1% in May compared with expectations of 0.3% growth on the month and there was an annual decline of 0.2% compared with expectations of a small increase.

The rate of decline in overall construction output was the second fastest since March 2016, exceeded only by February this year.

"With these outturns coming on the back of several months of soft data, it is now virtually certain that both [the industrial and construction] sectors will drag on GDP growth in the second quarter", said Howard Archer, chief economic adviser to the EY Item Club. "What's more, the weakness in the official series has come despite the trade data finally reporting some strong growth in export volumes". Sterling weakened by about 0.5 per cent against both the euro and the USA dollar.

Construction figures were also much worse than expected with output in the three months to May down 1.2 percent, the sharpest such drop since October 2015.

The latest composite PMI survey also showed that business activity rose at its weakest pace in four months in June, with business optimism falling amid rising uncertainty around the future of the country after Brexit.

"This morning's data paint a rather bleak picture for the United Kingdom economy and underline the challenges lying ahead", said Kay Daniel Neufeld, senior economist at the Centre for Economics and Business Research.

'And though an improved performance from the services sector will provide some support, GDP is likely to have grown by just 0.3 per cent with the risks to that projection skewed to the downside'.

The weak economic data suggests that the British economy is losing momentum and economists are now less convinced that the Bank of England will raise interest rates over the coming months.

The goods trade deficit increased to 11.863 billion pounds ($15.33 billion) in May from 10.595 billion pounds in April, the ONS said, wider than all forecasts in the Reuters poll.

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