UK manufacturing output sank in July, but economists cautious on drawing conclusions
Manufacturers pulled back more than expected after the Brexit vote, although economists were wary of drawing too many conclusions from the data just yet - for better and for worse - especially when trying to project the medium-term trend.
Thus, industrial production in fact grew more quickly than expected in July as a sharp jump in mining production more than offset a surprisingly weak performance from manufacturers in the wake of the Brexit vote.
Total output expanded by 0.1% month-on-month, according to the Office for National Statistics, besting forecasts for a drop of 0.2%.
Manufacturing production on the other hand sank 0.9% over the month (consensus: -0.3%), its biggest fall in a year and third consecutive monthly decline.
Acting as an offset, the always volatile mining sector boosted production by 4.7% month-on-month, with output from energy and water supply rising by 0.4% and 0.7%, respectively.
Overall, the data pointed to Britain´s gross domestic product stagnating in the third quarter or, possibly, shrinking slightly, according to economists.
According to Chris Williamson at IHS Markit, the ONS data confirmed earlier survey findings which pointed to a damaging impact from the referendum vote on manufacturers, with the overall picture one of a "stagnant" economy.
On a brigher note, and looking out to August, the more timely IHS Markit manufacturing sector purchasing managers´ index released on 1 September had pointed to a recovery in factory activity during the month of August.
Hence, "we should not get too concerned about what looks to have been a knee-jerk shock to the manufacturing economy in July, from which the sector has since rebounded," Williamson said.
Nonetheless, "it’s also wrong to be complacent [...] the overall picture of a flat economy in the third quarter so far also represents a sombre picture compared to the robust growth seen prior to the referendum.” he added.
According to the economist from IHS Markit, there was still widespread concern among manufacturers about prospects for the economy and to what extent access to the EU single market would be retained, although weaker sterling and stronger exports were supporting production and the wider economy.