Manufacturing sector on course to make strong contribution to growth in Q2 - ITEM Club

9 May 2013

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Nida Ali, economic advisor to the EY ITEM Club comments on today’s industrial production and manufacturing figures:

  • The manufacturing sector is on course to make a strong positive contribution to GDP growth in Q2
  • The rise in car production was particularly encouraging – a story of higher consumer demand and UK export success
  • But looking ahead UK manufacturers are still vulnerable to a fragile global recovery

“March’s increase in production output was well trailed by the preliminary GDP figures. The increase was driven primarily by the manufacturing sector, although it was also boosted by temporary effects, such as the cold weather in March raising utilities output, which will surely unwind in the months ahead.
 
“The sectoral breakdown suggests that the rise in manufacturing output was quite broad based. But the healthy increase in car production was particularly encouraging – this is a story of both higher consumer demand and UK export success.
 
“We now start Q2 with output almost 1% above the Q1 average and, given that recent survey data have shown signs of improvement, the sector is on course to make a strong positive contribution to GDP growth in Q2. Given that services activity appears firm, there is a good chance that Q2 growth could even be stronger than the first quarter.
 
“However, the underlying picture is still fragile, with weak Eurozone demand likely to continue to plague UK manufacturers. At the same time, faltering growth in emerging nations, such as China, will constrain companies’ efforts to rebalance towards these markets. So while today’s data represents better news, UK manufacturers aren’t out of the woods yet.”