Wednesday, September 7, 2016
IT'S OFFICIAL: British manufacturing took a big hit from Brexit
Yana Paskova / Stringer
British manufacturing production fell sharply in July — the first full month after Britain voted to leave the EU — according to official data released by the Office for National Statistics on Wednesday.
Manufacturing production, a measure of how much British factories are making, fell by 0.9% compared to June, a far bigger fall than the 0.4% drop that had been predicted by economists polled prior to the release.
On a year-to-year basis, manufacturing production grew just 0.8%, when 1.7% had been expected. While the post-referendum numbers for the manufacturing sector are disappointing, it should be noted that the sector wasn't exactly on a huge tear prior to the Brexit vote. Manufacturing production fell by 0.2% in June, and by 0.6% in May.
Industrial production as a whole in the UK surprised marginally to the upside, growing by 0.1% in the month, compared to an expected 0.2% fall. Year-on-year it grew by 2.1% against a forecast of 1.9% growth.
Here's how the figures look as part of the two-year trend:
Office for National Statistics
Commenting on the better than expected industrial production numbers, Samuel Tombs, chief UK economist at Pantheon Macroeconomics said (emphasis ours):
The modest rise in industrial production in July brings another upside surprise on the performance of the economy since the referendum, but it is still touch and go as to whether GDP will contract in Q3. The rise in production entirely reflected a 4.7% month-to-month jump in mining and quarrying output, which is extremely volatile.Manufacturing output fell 0.9% month-to-month, its third successive fall, while output in the energy and water supply sectors rose by 0.4% and 0.7% respectively.
In the initial aftermath of the referendum, PMI and business surveys pointed to a recession by the end of 2016, however in the last month, data has suggested that recession fears were somewhat overblown, and in the last week or so, IHS Markit's PMI surveys for all three crucial sectors of the economy — services, manufacturing, and construction — have bounced back from disastrous figures in July.
Manufacturing, for instance, saw its biggest single month jump in history, while services jumped quicker than at any time in 20 years. The construction sector remained in contraction,but it is important to note that the sector was already shrinking even before the Brexit vote.
These surveys led major banks, including Morgan Stanley, Credit Suisse, and Goldman Sachs,to row back on predicting a recession in the country.
Sterling slipped a little against the dollar on the ONS' data, falling from $1.3411 to $1.3391 at 9:55 a.m. BST (4:55 a.m. ET), 25 minutes after the release. Here's the chart: