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UK Manufacturing Experiences the Worst Month in Five Years

The manufacturing sector in the UK has experienced its worst month in more than five years. The reports come in the wake of claims that the GDP slump in the first quarter was triggered by snow. According to reports by the Office for National Statistics, firms’ outputs fell to 1.4 percent this month following a decline of 0.1 percent in May. Interestingly, the expectations of the city analysts were to hit a 0.3 percent expansion.

The monthly performance has been the worst since October 2012. ONS further added that weakness was widespread in the manufacturing sector with nine out of the total thirteen subsectors indicating a decline.

Last week, the Deputy Bank of England Governor said that the latest survey data was in agreement with the Bank’s view that the GDP would strongly bounce back in the second quarter. However, the recent manufacturing reports suggestotherwise considering that the sector accounts for ten percent of the GDP in the UK. Additionally, there has been a sharp fall of the pound to $1.3373.

The ONS also stated that the construction output was weak and had only grown by 0.5 percent after the 2.3 percent May slump. To add to the disappointing news, the ONS issued a separate report that the deficit in trade goods had become wider than expected in April. The deficit stood at £14.03bn compared to the £11.35bn predicted by the city analysts. Additionally, the value of goods exports minus erratics fell by 3.7 percent and imports by 2 percent on a three-month basis.

The British Chambers of Commerce, SurenThiru says that it seems that the UK is moving past the recent exporters’ sweet spot with moderated growth in key markets and the effects of the post-EU referendum slump in sterling which has favored some exporters, now subsiding. Moreover, the probability of an increasing trade war has weighed in on the downside risks for most exporters.

The analysis of the economicweakness in 2018 by ONS has been at odds with the Bank of England with the former outlining underlying weaknesses and the latter attributing the slowdown to the Beast from the East snowstorms of February and March. The Bank declined to raise interests in May saying that it would wait for the fruition of its optimistic view.

The slump of the GDP growth in the first quarter was estimated at 0.1 percent with the manufacturing growing by about 0.2 percent, services by 0.3 percent and a 2.7 percent slump in construction. Howard Archer of the EY item club says that the poor industrial production, trade data and construction output in April can only intensify the economic uncertainties and the bank’s interest rates may remain unchanged in June.