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Economy in Brief

U.K. IP Is Wobbly
by Robert Brusca  May 11, 2016

U.K. manufacturing industrial production rose by 0.1% in March as it fell at a 2% annual rate in Q1 2016. IP gained in March wholly on the back of capital equipment as consumer durables and nondurables output fell and intermediate goods output fell.

U.K. IP fell in February. In February IP also fell for consumer durables, intermediate goods, and capital goods. The February weakness was widespread too.

U.K. manufacturing IP is declining on all horizons from 12-month to six-month to three-month. The consumer sector (both durables and nondurables) shows decelerating output on these horizons. Capital goods output is declining on all horizons as well but not quite in a steady deceleration. Intermediate goods show sharp weakness over 12-month and six-month, but output has posted an increase over three-month. All sectors are showing output declines in the recently completed first quarter.

We also show detail for five sectors. Four of the five demonstrate output declines in the quarter-to-date (Q1). Food, textiles & leather, and motor vehicles each show sequentially weaker output from 12-month to six-month to three-month. Mining & quarrying and electricity, gas & water each show an output surge in the most recent three months since global oil prices have stabilized.

Year-on-year trends demonstrate that U.K. sector output trends have been eroding for some time. As the key vote on Brexit approaches, we find the U.K. economy is in a weakened state with little positive momentum from its manufacturing sector. U.K. retail sales also have slowed as has the BRC report on like-for-like sales (same store sales). Consumer confidence in the U.K. remains sky high, but it has been falling from its peak and now is at a point such that it was last lower in December 2014.

Manufacturing is just one of the U.K. sectors that now is somewhat worse for wear. U.K. inflation is still well below its target, but the rate has bottomed and is making a slow climb higher. However, house prices are starting to show some loss of momentum.

Like most countries, the U.K. manufacturing sector has been pressured and it has been up services to keep the economy on a steady keel. But the U.K. services sector shows slowing based on the service sector PMI reading.

The U.K. is hardly in a unique position in terms of its economic trends. However, it does have a special excuse as the prospect of Brexit hangs over its head. The international scene still seems more at risk that in a state of stasis as the Federal Reserve in the U.S. seems to want to see it.

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