Industrial production Confounds expectations and experiences its biggest leap since 2012.
Industrial production leapt 2% in April, it’s the biggest leap since 2012 and confounds the gloomy expectations of those who feared economic uncertainty and the looming EU referendum would be a drag economic growth in the second quarter.
Analysts had been predicting growth to be stagnant or to show a small rise of 0.1% and overall to be 0.4% down on the same period last year.
According to the data, released by the ONS on Wednesday the 8th June, Manufacturing Production surged 2.3%, much better than the 0.1% expected.
Growth was supported by a particularly successful pharmaceutical sector, which rose by 12.5% compared with 2015 – this is the sector’s largest jump since 2009.
A welcome boost
These figures represent a welcome shot in the arm for industry which had seen output decline for two successive quarters in Q4 2015 and Q1 2016 – the definition of a recession.
Despite contraction in February output has now risen 0.7% over the last few months.
Such positive news will have plenty of experts scratching their heads.
In the run up to the figures, most had been steeling themselves for bad news.
Ahead of the announcement the pound dropped against its major rivals the Dollar, Euro and Yen.
However, on the ONS announcement the pound rebounded and reached a high of $1.4580 before falling back a little. In the end it remained relatively flat over the course of the morning’s trading.
It represents a little respite for sterling which had been suffering after recent opinion polls showed the leave campaign gaining ground. The most recent average of polls has the leave campaign tracking at 43% with Remain on 42% and 12% don’t knows.
The economy had also been expected to suffer as uncertainty about the UK’s future in Europe appears to grow rather than recede the closer we get to the election.
Manufacturing has had a tough year with continued sluggish oil prices pushing back on growth, and many areas such as steel facing ongoing deflation of prices. Coupled with the impact of Brexit, analysts were convinced that today’s figures would have more disappointing news.
Instead, we have seen what Jasper Lawler of CMC Markets described as a ‘brexeleration’. Others hope these figures will translate to further surprises for GDP which most predict to be low in the second quarter.
It was just 0.4% in the first quarter of the year from 0.6% in the final quarter of 2015. Just a couple of more months of positive figures such as these could see GDP looking very much healthier.
Too soon to celebrate
Others, though, will warn against getting carried away. As good as these results are, they are unexpected.
Production output has been fluctuating between growth and contraction for some time.
The ONS says that production and manufacturing are currently still well below their pre-recession peak in 2008 – 9.4% and 6.4% respectively.
“Despite the upbeat tone of April’s industrial production figures, it is far too soon to proclaim that the sector is out of the woods, or shrugging off Brexit uncertainty,” says Paul Hollingsworth at Capital Economics.
These figures, though, will offer evidence that UK manufacturing will be relatively unaffected by the fluctuating fortunes of the referendum – in sharp contrast to currency markets which appear increasingly hostage to polling data.