UK factory output unexpectedly falls, while trade deficit widens

Source: Dukascopy Bank SA
"The economy is losing momentum. I don't think it's collapsing, but there are clear signs of stress. You see it in today's numbers, in the external facing parts of the economy that are coming under pressure."
- Ross Walker, economist at Royal Bank of Scotland Group Plc.

The fresh output and trade data added to signs of slowing momentum in economic growth in the UK. British manufacturing production declined sharply in July, hit by car plants' summer shutdown, while exports of goods fell the most in five years. The indicator decreased by a seasonally adjusted 0.8% in July, missing the estimates of a 0.2% growth and following a 0.2% increase in the previous month. The report also showed that industrial production fell by 0.4% in the seventh month of the year, confounding forecasts for a gain of 0.1%, after declining 0.4% in June. The weakness in manufacturing has increased Britain's dependence on its dominant services sector to power growth in the economy, complicating the challenge for the Bank of England as it ponders when to start raising interest rates. The trade balance data also disappointed, as the goods trade deficit expanded to 11.1 billion pounds in July, widening above the estimated 9.5 billion and compared with 8.5 billion pounds deficit in the prior month. The largest decrease was in the export of chemicals, cars and works of art, while the import of machinery and transport equipment increased between June and July. After disappointing factory and services surveys last week, the latest data may push the MPC of the BoE into adopting a dovish tone on when to start raising borrowing costs from a record low.


© Dukascopy Bank SA

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