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| UK manufacturing suffers surprise output fall after string of upbeat surveys | UK manufacturing suffers surprise output fall after string of upbeat surveys |
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| UK manufacturing suffered an unexpected drop in output in May, dampening hopes the economic recovery has gathered pace. | UK manufacturing suffered an unexpected drop in output in May, dampening hopes the economic recovery has gathered pace. |
| Interrupting a recent string of upbeat indicators on the UK economy, official figures showed manufacturing output dropped 0.8% in May, rather than rising 0.2% as economists had forecast. On a year ago, output dropped almost twice as fast as forecast, by 2.9%. Those were the biggest monthly and yearly declines since January when companies were contending with an unusually harsh winter. | Interrupting a recent string of upbeat indicators on the UK economy, official figures showed manufacturing output dropped 0.8% in May, rather than rising 0.2% as economists had forecast. On a year ago, output dropped almost twice as fast as forecast, by 2.9%. Those were the biggest monthly and yearly declines since January when companies were contending with an unusually harsh winter. |
| The wider industrial sector, which also includes energy and mining and makes up some 15% of the economy, was flat in May, the Office for National Statistics said. Again, that undershot forecasts, which had been for modest growth of 0.2% on the month. | The wider industrial sector, which also includes energy and mining and makes up some 15% of the economy, was flat in May, the Office for National Statistics said. Again, that undershot forecasts, which had been for modest growth of 0.2% on the month. |
| The data, published alongside figures showing a deterioration in Britain's trade balance, bucked the trend in recent weeks for surveys and official numbers to beat expectations. A closely watched report on manufacturing for June – one month later than this official data – had suggested the sector was growing at its fastest pace for two years. Combined with other indicators it had prompted many economists to raise their forecasts for overall economic growth in the second quarter, with some now believing the pace doubled to 0.6% from 0.3% in the first three months of the year. | The data, published alongside figures showing a deterioration in Britain's trade balance, bucked the trend in recent weeks for surveys and official numbers to beat expectations. A closely watched report on manufacturing for June – one month later than this official data – had suggested the sector was growing at its fastest pace for two years. Combined with other indicators it had prompted many economists to raise their forecasts for overall economic growth in the second quarter, with some now believing the pace doubled to 0.6% from 0.3% in the first three months of the year. |
| The latest manufacturing data was "surprisingly weak", said David Tinsley, economist at BNP Paribas. "Overall, this is not a strong set of data and is a reminder that the surveys of manufacturing can often signal a different underlying picture to the monthly output data in the official sources. | The latest manufacturing data was "surprisingly weak", said David Tinsley, economist at BNP Paribas. "Overall, this is not a strong set of data and is a reminder that the surveys of manufacturing can often signal a different underlying picture to the monthly output data in the official sources. |
| "The momentum behind manufacturing remains disappointingly weak, which is troubling given the economy needs to do more to rebalance towards sectors where it can hope to find demand for its exports." | "The momentum behind manufacturing remains disappointingly weak, which is troubling given the economy needs to do more to rebalance towards sectors where it can hope to find demand for its exports." |
| The government has been looking to manufacturing to power Britain's recovery as part of a longer-term rebalancing of the economy away from a dependence on domestic demand and the services sector. | The government has been looking to manufacturing to power Britain's recovery as part of a longer-term rebalancing of the economy away from a dependence on domestic demand and the services sector. |
| EEF, the manufacturers' organisation, said the latest official data "cast a bit of a cloud over the positive run of industry data in recent months" but that rebalancing could still happen. | EEF, the manufacturers' organisation, said the latest official data "cast a bit of a cloud over the positive run of industry data in recent months" but that rebalancing could still happen. |
| "While the ONS data suggests industry's contribution to growth in the second quarter is likely to be limited, there are signs that confidence is returning and growth should start to resume as we move into the second half of the year. This needs to be quickly followed by a pick up in investment if the UK is to make any progress towards better balanced growth," said EEF chief economist Lee Hopley. | "While the ONS data suggests industry's contribution to growth in the second quarter is likely to be limited, there are signs that confidence is returning and growth should start to resume as we move into the second half of the year. This needs to be quickly followed by a pick up in investment if the UK is to make any progress towards better balanced growth," said EEF chief economist Lee Hopley. |
| There was some positive news on the rebalancing front for George Osborne in the trade data, which showed exports continued to grow in May. Goods exports rose by 2.7% in the three months to May from the previous three months – a less erratic measure than monthly trade numbers. Furthermore, the growth was driven by exports to countries beyond the troubled eurozone, no doubt bringing cheer to business secretary Vince Cable and industry groups as they continue their push for sales to new markets. | There was some positive news on the rebalancing front for George Osborne in the trade data, which showed exports continued to grow in May. Goods exports rose by 2.7% in the three months to May from the previous three months – a less erratic measure than monthly trade numbers. Furthermore, the growth was driven by exports to countries beyond the troubled eurozone, no doubt bringing cheer to business secretary Vince Cable and industry groups as they continue their push for sales to new markets. |
| Exports to the EU increased by 0.8% to £37.4bn and exports to non-EU countries increased by 4.6% to a record £39bn on a three-month basis. | Exports to the EU increased by 0.8% to £37.4bn and exports to non-EU countries increased by 4.6% to a record £39bn on a three-month basis. |
| UK companies were continuing to grow their exports to the US and even more so to China. The value of exports to China was 17% higher than the average 2012 quarterly level, the ONS said. | UK companies were continuing to grow their exports to the US and even more so to China. The value of exports to China was 17% higher than the average 2012 quarterly level, the ONS said. |
| However, Britain's overall trade deficit rose in May, to £8.49bn for goods as imports also rose. That was slightly wider than the £8.47bn gap forecast by economists. Still, a rise in imports was not necessarily bad news, analysts noted. | However, Britain's overall trade deficit rose in May, to £8.49bn for goods as imports also rose. That was slightly wider than the £8.47bn gap forecast by economists. Still, a rise in imports was not necessarily bad news, analysts noted. |
| "While bad news for the deficit, the increase in imports at least supports the notion that demand is starting to revive again in the UK. It would just clearly be better if money was being spent on UK-produced goods and services rather than imports," said Chris Williamson, chief economist at data specialists Markit. | "While bad news for the deficit, the increase in imports at least supports the notion that demand is starting to revive again in the UK. It would just clearly be better if money was being spent on UK-produced goods and services rather than imports," said Chris Williamson, chief economist at data specialists Markit. |
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