UK industrial production misses expectations
After the service sector beat expectations, UK industrial production reported some remarkably underwhelming numbers for June.
Industrial production dribbled up 0.3 per cent between May and June, falling well short of expectations.
As if that wasn't inspiring enough, manufacturing grew by only 0.3 as well, according to Office of National Statistics figures. Together the figures couldn't make up for the 1.3 per cent decline in May.
The Markit purchasing managers' index (PMI) for services showed strong growth yesterday, coming in at 59.1, implying that growth may be relying on that sector.
Sam Hill, senior UK Economist at RBC Capital Markets saw some limited room for optimism:
To the extent that industrial production did recover the decline in activity in May, manufacturing production (68 per cent of total IP) is largely responsible for the reversal in June. The transport equipment component had a strong rebound with production here jumping 3.9 per cent month-on-month (mom) following a fall of 1.9 per cent mom in May.
The manufacturing of motor vehicles increased by 5.6 per cent mom in the transport sub-sector. Alongside a decline in mining and quarrying output in June – thought to be attributable to summer maintenance – the overall underlying trend arguably isn’t as disappointing as the undershoot of consensus suggests.
Nevertheless, with the Manufacturing PMI dropping in July against an increase in Services PMI the MPC can look to the industrial production sector for more early evidence of the slowing in growth it currently expects in H2 2014.
It is true that despite a downtick, the recent Markit PMI reading for manufacturing wasn't as bad as this data suggests. Despite coming it at its lowest for a year at 55.4, the figure was still above the 50.0 and therefore indicates growth.
The chart below shows the evolution of the indexes since the second quarter of 2004. It is indexed to 2010