Research Team at RBS, notes that the UK manufacturing production fell sharply in July to 0.9% m/m which is the largest contraction for a year and some way below City forecasts (Bloomberg consensus & RBS: 0.3%, City forecast range: 1.2% to +0.4%).
Key Quotes
“The wider industrial production (IP) gauge, which includes energy extraction and utilities output, rose 0.1% m/m in July, fuelled by a 5.6% surge in oil & gas output.
In essence, the upside surprise in the IP data stemmed from the hugely volatile ‘oil & gas extraction’ subcomponent. The more informative manufacturing data showed weakness across a wide range of sectors in July.
Even if the reported fall in manufacturing output in July exaggerates the underlying extent of the deterioration (it almost certainly does), the balance of risks has jolted back towards a weaker Q3 GDP print (our forecast for Q3 GDP remains +0.2% q/q). The official ONS industry data in July are more significant than the PMI survey in August (the PMI data are relevant in terms of the underlying trend – which in any case remains sluggish – not individual monthly outturns).
Assuming some normalisation in the August and September data, British industry remains on course for IP to contract in Q3: by around 0.2% q/q. British industry is heading back into recession – the construction sector is already there on the ONS data and we are likely to see ongoing weakness there in Q3 (construction data for July will be published on Friday). The predominant services sector is likely to provide some offset, but underlying trends here suggest Q3 growth of around 0.4%0.5% q/q – which would see overall GDP growth fall sharply to +0.2% q/q in Q3 vs +0.6% q/q in Q2.
Our central case remains for the UK economy to experience a material slowdown over the next few quarters, with recent developments in several important global indicators suggest more obvious downside risks are building.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
USD/JPY advances toward 149.50 ahead of crucial BoJ policy decision
USD/JPY is rising toward 149.50 in the Asian session on Tuesday, picking up fresh bids. Traders keenly await the highly-anticipated Bank of Japan policy decision. The BoJ's outlook on the negative interest rate policy and the Yield Curve Control (YCC) will play a key role in influencing the Japanese Yen.
AUD/USD creeps lower to test 0.6550 ahead of RBA’s decision
AUD/USD is grinding lower to test the 0.6550 level in Asian trading on Tuesday. The Aussie Dollar stays on the defensive against the US Dollar as markets prepare for the Reserve Bank of Australia's extended pause but the Bank's rate outlook will hold the key.
Gold awaits Bull Flag confirmation and central banks’ verdicts
Gold price is holding the previous rebounding in Asian trading on Tuesday, as buyers take a breather ahead of the upcoming key central banks’ policy decisions. The US Dollar is stretching higher amid a risk-averse market environment, shrugging off some weakness in the US Treasury bond yields.
Avalanche price could rise 20% on gaming narrative ahead of GDC conference
Avalanche is an outlier on Monday, rallying while the broader market is crashing. It has outperformed Bitcoin price, as well as meme and AI crypto coins, sectors that have been thriving of late.
Australia Interest Rate Decision Preview: RBA set to stand pat after discussing rate hikes in February
The Reserve Bank of Australia is widely expected to hold the Official Cash Rate steady at a 12-year high of 4.35% following the conclusion of its March monetary policy meeting on Tuesday. The decision will be announced at 03:30 GMT.