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UK industrial data confirms weak end to first quarter GDP

By Oliver Haill

Date: Thursday 11 May 2017

UK industrial data confirms weak end to first quarter GDP

(ShareCast News) - UK industrial activity disappointed for the second month in a row, according to official data published on Thursday that confirmed the economy lost some momentum in the first quarter of the year.
Basic metals and metal products provided the largest downward pressure on manufacturing in March 2017, the Office for National Statistics said, while warmer-than-average temperatures led to a decrease in energy supply.

Industrial production data for March dropped 0.5% on the previous month, on the back of a prior 0.8% decline.

While this was short of economists' consensus forecast for a smaller 0.3% fall, it was slightly less of a drop than the 0.7% contained in the ONS's preliminary estimate of first-quarter gross domestic product.

Year-on-year industrial production rose 1.4%, which was also short of the 2.1% gain expected.

Manufacturing production activity shrank 0.60% on the previous month when a flat month had been forecast after the 0.3% fall in February.

Manufacturing grew 2.3% in March compared to the same month last year, short of the 2.1% consensus estimate and down from the February's 2.5%.

The ONS also revealed that construction output was down 0.7% month-on-month, which was below the 0.3% drop estimated in its initial first-quarter GDP estimate.

This was a "ropey set" of data for the UK economy, said economist Howard Archer at IHS Markit, which pointed to a poor end to a disappointing first quarter.

"The poor data dilute any hopes that markedly slower GDP growth of 0.3% quarter-on-quarter in the first quarter could be revised up.

"Indeed, the actual industrial production data was weaker than estimated in the preliminary first quarter GDP estimate while the trade deficit unexpectedly widened. Construction output was in line with expectations."

However, while the ONS data re-affirmed that the economy lost some momentum in the first quarter of the year, Scott Bowman Capital Economics said it suggested that UK GDP growth is becoming slightly better balanced.

Despite the small revisions to the various elements of GDP, the industrial and construction sectors still make negligible contributions to GDP growth, Bowman said, so there shouldn't be any changes to the slowdown in quarterly growth to 0.3% in Q1 from 0.7% in Q4.

"However, the revisions mean that manufacturing output grew by a quarterly 0.3% in Q1, in line with the services sector's rate. And surveys suggest that manufacturing output growth has accelerated at the start of Q2. This sets the base for more balanced GDP growth in 2017, after the services sector accounted for almost all of the economy's expansion in 2016."

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