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UK manufacturing output grinds to a halt in three months to June

By Michele Maatouk

Date: Wednesday 19 Jun 2019

UK manufacturing output grinds to a halt in three months to June

(Sharecast News) - Manufacturing output in the UK ground to a halt in the three months to June as the pre-Brexit stockpiling boost faded, according to the latest survey from the Confederation of British Industry
The CBI's total orders balance fell to -15 this month from -10 in May, coming in below consensus expectations for a decline to -11 and hitting its lowest level since October 2016.

The CBI said the slowdown was driven primarily by the sharpest contraction in motor vehicle manufacturing since March 2009, as producers brought forward seasonal plant closures.

The CBI's principal economist, Alpesh Paleja, said: "The bringing forward of planned closures to car manufacturing plants had a real impact and led to manufacturing output grinding to a halt. While the picture elsewhere in the sector was more benign, total orders weakened once again revealing some underlying causes for concern.

"There's clear evidence that Brexit uncertainty is really biting, with our surveys showing volatility in both stocks and output in recent months. Firms are desperate to see an end to the current impasse - that means securing a Brexit deal that can not only command the support of parliament and the EU, but prioritise the protection of jobs and the economy."

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said the survey provides more evidence that the manufacturing sector had a poor second quarter, although most of the weakness appears to be attributable to the shift in activity to the first quarter due to the March Brexit deadline.

"On past form, the total orders balance is consistent with output falling at a 1% year-over-year rate in Q2; note that the orders index has not displayed leading properties in the past. A sharper drop in Q2 looks likely, given awful official data for April.

"Nonetheless, most of the recent weakness has been concentrated in the autos sector; many car plants brought forward their usual annual maintenance periods from the summer to Q2, in order to minimise the costs in a no-deal scenario. Car production should recover strongly in Q3, providing a tangible boost to manufacturing output. Even if we're wrong, though, and the manufacturing sector contracts again in Q3, the overall economy should avoid a recession, given that manufacturing output accounts for only 10% of GDP and the much larger services sector stands to benefit from robust growth in households' disposable incomes."

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