Manufacturing, Industrial Production Data Delivers first Post-Brexit Vote Flop

Any hopes for a recovery in Pound Sterling on Friday were dashed by underwhelming data on manufacturing and production from the ONS.

The ONS has reported stale growth in the UK’s manufacturing and industrial production sectors on the morning of Friday 7th October.

Analysts had been expecting some decent figures having observed the robust rebound in manufacturing surveys compiled by IHS Markit and the CBI over recent weeks.

The ONS reported month-on-month Manufacturing Production in August read at 0.2%, below the 0.5% forecast by economists.

Month-on-month industrial production for August meanwhile read at -0.4%, analyst had forecast growth at 0.1%.

ONS manufacturing production

Mining & quarrying output in industrial production, led by oil & gas, accounted for much of the headline drag, shrinking by 3.7% m/m after a 6.8% m/m surge in July.

The modest gain in manufacturing was, moreover, narrowly-based, with increases in only 4 out of 13 manufacturing sub-sectors.

“Against a backdrop of improving readings in recent industrial indicators – July saw big drops in PMI survey readings in the aftermath of the referendum result that were more than unwound in August and September – today’s report is the first disappointing piece of “hard” data for Q3’s post-referendum quarter,” say Lloyds Bank Commercial Banking in a client briefing.

Coming after a sharp 2.1% quarterly gain in industrial activity over Q2 as a whole Lloyds say it now seems likely that the industrial sector is likely to drag on GDP growth in Q3, sterling’s export-supportive declines notwithstanding.

Following a strong start to the quarter, notably in the services sector, GDP growth for Q3 is forecast by the bank to still post a 0.4% q/q or so gain.

“But the weakness of today’s report is a reminder that solid early Q3 momentum does not imply that the UK’s post-referendum economic outlook is overall unscathed,” say Lloyds.

More Pound Sterling Volatility Ahead

“After spending much of this week hearing about sterling plummeting to its lowest level in decades, the poor manufacturing production data will make further grim reading for Prime Minister Theresa May this morning,” says Dennis de Jong at

May, and Chancellor Philip Hammond, who spent yesterday visiting Wall Street, were likely hopeful that today’s results would go some way towards arresting the pound’s sharp drop against the dollar.

“However, most observers will primarily be focused on the details of May’s Brexit negotiation wish list ahead of the triggering of Article 50 in the coming months. Before the UK’s position is clear, the pound will likely remain volatile for the foreseeable future,” says de Jong.