Industrial and Manufacturing Production Surges, Economy Becoming More Balanced

Manufacturing and industrial production data

A deluge of economic data as part of the ONS’ new “Theme Days” adds to other evidence that the UK economy maintained a decent amount of momentum in the fourth quarter and that growth has become better balanced.

A surprise jump in UK manufacturing and industrial production activity confirms the economy remains defiant in the face of forecasts for a slowdown in 2017.

UK manufacturing production for November 2016 grew at 1.3% on a month-to-month basis according to the latest official figures. This is an impressive beat on the forecast for growth of 0.55.

It is also an impressive improvement on the previous month’s figure which shows the sector shrunk 1%.

“From last week’s 30-month high PMI reading to today’s highly positive production numbers, the UK’s manufacturing sector looks in fine fettle,” says Paul Sirani, Chief Market Analyst at Xtrade. “The weakened Pound has helped to boost orders from overseas and puts the UK manufacturing sector on a strong footing for what could be a very turbulent year ahead.”

Industrial production meanwhile grew 2.1% on a monthly basis, ahead of forecasts for 0.8% and an improvement on the decline of 1.1% registered in October.

The ONS reports the increase in total industrial production was mainly due to increased oil and gas output, with the Buzzard oil field coming back online after a prolonged shutdown, along with increased output from the other fields.

In addition, pharmaceuticals (which can be highly erratic) also saw large growth.

The increase of 1.9% in electric power generation, transmission and distribution also provided an upward contribution to total production and was due to the lower than average temperature in November 2016.

“The better than expected November figures on UK industrial production are a welcome return to form after a surprising slump in October, and indicate the sector is in good health,” says Dennis de Jong, managing director at UFX.com.

Nevertheless, many observers are expecting manufacturing to suffer amid the uncertainty.

“This could all change, however, with Brexit keeping the economy fluctuating and investors unsure about what is around the corner,” says Sirani.

However, de Jong believes the fall in the Pound may cushion the sector to some extent:

“Theresa May’s indication that a hard-Brexit is increasingly likely has seen Sterling slump which may well be the saviour of British industry as exports gain in attractiveness.”

Aventure Wealth Consultation