Good August manufacturing figures boost British pound
After a July slump of -0.7%, UK manufacturing was +0.5% up in August, according to figures published by the Office for National Statistics (ONS) on Wednesday. Industrial output recovered as car factories came back online after summer shutdowns.
Analysts, who had expected to see a +0.3% rise in August, were surprised with the +0.8% increase.
Within minutes of the publication of the news, the pound sterling rose above $1.53 – a two-week high.
Manufacturing still down overall
However, August’s increase was not enough to make up for the recent decline. Manufacturing output in August 2015 was still -0.8% lower than in August 2014.
Source: Monthly Business Survey (Production and Services) – Office for National Statistics
Over a three-month period, which economists see as a more reliable statistic because it smooths out monthly fluctuations, manufacturing declined by -0.9% compared with the previous quarterly figure.
The main manufacturing components that contributed to August’s growth were the manufacture of basic metals & metal products, the manufacture of transport equipment, and the manufacture of food, beverages & tobacco.
Manufacturing still has some way to go before pre-crisis levels are restored. In the 3 months to August 2015, manufacturing was -6.5% below the figure reached in Q1 2008.
Total production rose by +1.9% in August, compared to the same month last year, and by +1.0% compared to the previous month. There were increases in 2 of production’s 4 main sectors, with mining & quarrying rising by 17.7% (the largest contribution to the increase). Oil and gas production rose significantly.
While welcoming the signs of a slight industrial revival in August, economists cautioned that the overall picture is still weak. They forecast only a very marginal expansion in the three months to September.
The Financial Times quoted Vicky Redwood, chief UK economist at Capital Economics, who said:
“August’s UK industrial production figures are surprisingly good, although they aren’t enough to have stopped the overall economic recovery from slowing in the third quarter. Accordingly, production in the third quarter as a whole should just about manage to eke out a rise.”