ITEM Club comments on 'downbeat' manufacturing and trade data in August

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

  • A downbeat set of figures for both manufacturing and trade in August
  • But stepping back from the August data, we are still looking at firm GDP growth in Q3
  • An unfavourable external environment means that the near-term outlook for manufacturing and trade is weak, but we are more optimistic about prospects further out

“A downbeat set of figures for both manufacturing and trade in August, which supports recent PMI surveys. However the figures in July were artificially inflated due to the extra Bank holiday in June, so part of the weakness in August can also be attributed to base effects.

“Stepping back from the data, we are still looking at firm GDP growth in Q3. The level of manufacturing output in July and August is well above the Q2 average, so manufacturing is set to contribute positively to growth in Q3. With export volumes much higher than the Q2 average as well and import volumes slightly lower there should be a positive contribution from net trade.

“With the Eurozone likely to slip back into recession and signs of a slowdown in the US and some of the main emerging markets like China and India, we expect both manufacturing and exports to remain weak in future months. But providing that the Eurozone remains intact and drags itself out of recession we are more optimistic about the prospects for UK manufacturers and exporters further out.”