UK industrial production rebounds, but less than expected

UK industrial growth slowed in April as manufacturing activity bounced back slowly from a fall the previous month, the Office for National Statistics said on Friday.

UK industrial production rose 0.2% month-on-month in April, the ONS said, which was short of the consensus forecast for a 0.7% rise as seen in March.

Year on year, industrial production fell 0.8%, worse than the 0.3% drop expected and down from the 1.4% rise the month before.

UK manufacturing production rebounded 0.2% m/m in April from the drop of 0.6% the previous month, though this was shy of the 0.8% improvement anticipated by economists.

Manufacturing activity was flat on a year-on-year basis when a 0.7% increase was forecast after a revised previous improvement of 2.2% for March.

Construction output declined by for the fourth month in a row, falling 1.6% m/m, with weakness primarily driven by residential construction but with commercial construction and non-dwellings repair & maintenance both detracting too, partially offset by stronger infrastructure & public construction.

All in all, April activity data came in broadly softer, observed Barclays.

"If anything, overall it maintained the weak message seen over Q1 17. While industrial output data came in line with our expectations and the trade balance narrowed as we had expected, construction data disappointed and we may see a downward revision to residential construction investment off the back of it, and turnover was very weak.

"Overall, this supports our view that Q2 17 output will be, if anything, as weak as in Q1 17."

Ruth Gregory at Capital Economics said the data has "cast some doubt on the likely strength of the bounce-back in overall activity growth in the second quarter".

With output in the manufacturing sector defying the upbeat tone of the recent survey evidence too, suggesting the production and construction sectors are on course to provide a negligible contribution to GDP growth in Q2 once again, she said she would not read too much into manufacturing weakness as it reflects a sharp fall in output in the volatile pharmaceuticals sector.

"What’s more, survey evidence has remained very buoyant and is still pointing to an acceleration in the annual growth rate of manufacturing output."

There were more encouraging signs from trade data released by ONS on Friday too, with the overall trade deficit narrowing from an upwardly-revised £3.9bn in March to £2.1bn, versus a consensus forecast of £3.5bn, and the three-month growth rate of goods export volumes hitting 3.7% in April from 1.6% in October.

Gregory concluded: "Looking ahead, there is clearly a risk that today’s election result causes growth to weaken towards the end of Q2. That said, this is unlikely to spell disaster since the economy has proved pretty resilient to political uncertainty in the recent past."