Another dire set of figures from manufacturing sector, says ITEM Club - decline in Q4 GDP is likely

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Andrew Goodwin, senior economic advisor to the EY ITEM Club, comments on today’s industrial production and manufacturing figures:

  • Another truly dire manufacturing release
  • The extent of the decline in output is much worse than the surveys had been flagging
  • A decline in GDP in Q4 now looks more than likely

“A truly dire set of figures for the manufacturing sector, with output collapsing unexpectedly in October. The manufacturing survey data has been disappointing in recent months, but nothing like as bad as these figures would suggest. Admittedly some of this weakness is due to planned maintenance in the coke & refined petroleum sector, but this is a very small sector and there is no escaping the broad-based declines elsewhere.
“It is difficult to be anything other than gloomy about short-term prospects for manufacturers. The business survey results have been worsening over the past couple of months and the outlook for our key export market, the Eurozone, remains very fragile. Furthermore, having previously enjoyed strong growth in exports to emerging markets, in particular China, yesterday’s trade release suggests that demand from these countries has also tailed off in recent months.
“The impact on overall production in October was mitigated by the sharp rise in utilities output but, even on a best case scenario, we are looking at production output declining by more than 1% in Q4. With services only growing very slowly, this sizable drag from production is likely to be enough to tip Q4 GDP growth back into negative territory.”