March of the makers continures - EY ITEM club comments on today's industrial production and trade data

9 May 2014

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  • Modest decline in industrial output in March…
  • …but the ‘march of the makers’ continues…
  • …and fall in trade deficit provides further good news on the rebalancing front

Martin Beck, senior economic adviser to the EY ITEM Club said on industrial production:

“While March’s industrial output numbers showed a small monthly decline in output, the underlying picture remains positive. Overall growth was dragged down by a lacklustre performance in oil and gas and the utilities sector. But manufacturing output saw its fourth consecutive monthly expansion, the longest consistent run of growth since 2006.

“A similar story is evident in the numbers for Q1 as a whole. Manufacturing output rose at a quarterly rate of 1.4%, well in excess of the growth of the economy as a whole. Meanwhile, March’s slight drop in industrial output took the sector’s expansion to 0.7% in Q1, a touch below the 0.8% estimated by the ONS in its preliminary measure of GDP. But this will not be enough to prompt a downward revision of the GDP estimate. And there was some offsetting good news in today’s construction figures, with the ONS doubling its estimate of growth in construction output in Q1. 

“So the ‘march of the makers’ continues. And with April’s manufacturing PMI registering one of its best readings in the last three years, Q2 seems set fair for further strong growth in the manufacturing sector.”

Martin added on trade figures:

“Meanwhile, March’s trade figures provided a further boost to rebalancing hopes. Goods exports in March saw their first rise this year, growing at almost twice the rate of imports. This contributed to the overall deficit in goods and services falling to its second lowest level in over a year. Sales of cars saw particularly strong growth.

“Admittedly, March’s data still means that exports in Q1 as a whole fell compared to the previous quarter. But with imports dropping even faster, the overall trade deficit was almost 8% lower than in the last quarter of 2013, pointing to net trade adding to GDP growth in the first quarter. Moreover, falling imports suggest that perceptions that the economic recovery is built on an unsustainable consumer boom are even more wide of the mark.”