UK manufacturing output fell unexpectedly in August, official figures show, and the country’s trade deficit was worse than expected as the balance with countries outside the European Union deteriorated, official figures show.
However, oil and gas extraction jumped in August.
Monthly gross domestic product data published yesterday by the Office for National Statistics showed UK economic output stagnated during August, after upwardly revised month-on-month growth of 0.4% in July.
GDP during the June to August period was up by 0.7 per cent on the preceding three months, ahead of economists’ forecasts of a 0.6% increase, according to the ONS figures.
Howard Archer, chief economic adviser to the EY ITEM Club think-tank, raised his forecast of third-quarter growth to 0.6%, from 0.5%.
However, he highlighted the danger of a slowdown in growth in the fourth quarter amid Brexit and political uncertainties.
Mr Archer said: “We think there is a very real risk that growth will slow in the fourth quarter due to appreciable Brexit and political uncertainties weighing down on business investment and also limited willingness for companies to place major contracts. Additionally, still-stretched consumers may rein in their spending after seemingly splashing out at an increased rate over the third quarter.”
UK manufacturing output fell by 0.2% in August, ONS figures showed yesterday. Economists had forecast a 0.1% rise.
Broader industrial production, which includes mining and quarrying, oil and gas extraction and electricity, gas and water supply as well as manufacturing output, rose by 0.2%.
Industrial production was boosted by a 2.6% month-on-month rise in oil and gas extraction. This followed a 5.7% month-on-month surge in oil and gas extraction in July.
UK construction output fell by 0.7% in August, more than offsetting a 0.5% rise in July. The services sector stagnated during August, after a 0.3% rise in its output during July.
The UK’s global goods trade deficit came in at £11.2 billion in August, as imports rose by significantly more than exports. This marked a deterioration from an upwardly revised July deficit of £10.4bn and was worse than the £10.9bn figure for August forecast by economists.
The deterioration was driven by a worsening of the UK’s deficit on goods trade with countries outwith the EU, from £3.14bn to £4.22bn.
The UK’s deficit on trade in goods with other EU countries narrowed from £7.24bn in July to £6.98bn in August.
Mr Archer highlighted his view that the Bank of England’s Monetary Policy Committee, which has implemented two quarter-point rises in UK base rates since last November to take them to 0.75%, would hold off from further increases until after Brexit, given prevailing uncertainty.
He said: “Robust GDP growth in the three months to August, combined with a rise in [annual] consumer price inflation to a six-month high of 2.7% in August and tentative signs in July that earnings growth could finally be picking up would normally fuel expectations that it would not be long before the Bank of England raises interest rates again.
“However, it looks far more likely than not that the Bank of England will not raise interest rates again until after the UK leaves the EU in March 2019 given the major uncertainties that will likely continue to occur in the run-up to the UK’s departure.”
Mr Archer added: “The MPC will want to see sustained evidence that the economy is holding up in the aftermath of the UK leaving the EU before it raises interest rates again.”
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules here