| UK: Manufacturing edges up, but trend slowing |
| 08.11.11 12:07 | |
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Small rise in Q3, but underlying trend weakening Manufacturing output rose 0.2% in September: very close to the median market expectation of a 0.1% gain, and ending a run of three consecutive small monthly declines. Within individual industries, performance over the month was very diverse, with output of food, chemicals and computers falling sharply, but transport equipment, basic metals and textiles rising strongly. After falling around 14% from a peak in early 2008 to a trough in mid 2009, manufacturing output recovered robustly through to Spring this year, recouping around one-half of those losses. However, both official manufacturing output data and a range of survey evidence (PMI, BoE's agents, CBI) shows that the underlying trend in the sector has softened notably over the last few months. Slower growth in exports (around 40% of manufacturing output) has contributed to that, and given that we now expect the euro area - by far the UK's largest trading partner - to fall back into recession over the next few months, that could impart further downward pressure on manufacturing output ahead. While the weakness of sterling should provide support, thus far that weakness has more obviously been used to support exporters' profit margins, rather than materially boost sales volumes. So with a range of other factors also continuing to weigh on domestic demand (eg contracting real wages, poor confidence, fiscal tightening, tight credit conditions), prospects for the manufacturing sector - and GDP more generally - appear increasingly soft. source: Bank of America ML |
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