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
EUR/USD stabilizes near 1.0800 as trading action turns subdued
EUR/USD holds steady near 1.0800 on Thursday and remains on track to end the day in negative territory following upbeat macroeconomic data releases from the US. The action in financial markets turn subdued as trading volumes thin out heading into Easter holiday.
GBP/USD stays in daily range above 1.2600
GBP/USD fluctuates in a narrow channel above 1.2600 on Thursday. The better-than-expected Initial Jobless Claims data from the US and the upward revision to the Q4 GDP growth helps the USD stay resilient against its rivals and limits the pair's upside.
Gold pulls away from daily highs, holds above $2,200
Gold retreats from daily highs but holds comfortably above $2,200 in the American session on Thursday. The benchmark 10-year US Treasury bond yield stays above 4.2% after upbeat US data and makes it difficult for XAU/USD to preserve its bullish momentum.
XRP price falls to $0.60 support as Ripple ruling doesn’t help Coinbase lawsuit against SEC
XRP programmatic sales ruling by Judge Torres was completely rejected by another US Court that ruled in favor of the SEC in a lawsuit against Coinbase.
Portfolio rebalancing and reflation trades emerge into Q2
Yesterday’s price action pointed at a possible end-of-quarter portfolio rebalancing as the session saw the laggards of the quarter like Apple and Tesla gain, and the stars like Microsoft and Nvidia retreat.