Shock manufacturing slide casts doubt on UK economy’s bounceback

Author: Agencies

British factories had their worst month in five-and-a-half years in April, suggesting the economy’s weak start to 2018 has persisted and lowering the likelihood of the Bank of England raising interest rates again any time soon.

Sterling slid as data showed the biggest fall in factory output since 2012 due to tepid demand at home and abroad.

The Office for National Statistics also said Britain posted its biggest trade deficit since September 2016.

“The rebound in GDP as a whole in Q2, if there is one, could be pretty subdued and it certainly questions the likelihood of another rate increase in August,” Investec economist Philip Shaw said.

Britain’s economy slowed sharply last year, even as much of the rest of the world picked up speed, as the 2016 Brexit vote left consumers with higher inflation and companies turned cautious about investment. Things got worse in early 2018 but the BoE said the slump was probably mostly due to cold weather.

Monday’s figures did little to support comments last week by BoE Deputy Governor Dave Ramsden who said data until that point suggested the economy’s weak start to 2018 would probably prove temporary.

The BoE is looking for evidence that the economy is on a firmer footing before it resumes raising rates.

Britain’s economy probably grew only 0.2 percent in the three months to May, the National Institute of Economic and Social Research think tank said.

Manufacturing output dropped by 1.4 percent in April after a 0.1 percent decline in March, the biggest month-on-month fall since October 2012, the ONS said.

Published in Daily Times, June 12^th 2018.