Improving prospects for Q1 GDP as threat of triple dip recession recedes - ITEM Club comments on today's manufacturing and trade balance figures

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

“December’s strong bounce had already been flagged by the recent Q4 GDP data. But despite the strong monthly growth rate, manufacturing output still fell sharply over 2012 as a whole and there is a clear link to the UK’s poor export performance, in particular the slump in exports to the Eurozone.
“Having said that, today’s figures suggests that prospects for Q1 are brighter, with the threat of a triple-dip recession receding. The rise in manufacturing output in December means that the level of output is now well above the Q4 average. Also, recent survey data suggests that output will continue expanding in the coming months, largely as a result of improved domestic demand. Manufacturing looks set to contribute positively to growth in the first quarter.”
Mark Gregory, EY’s chief economist added:

“The near-term export outlook remains weak, with the PMI surveys consistently report falling export orders. The global growth climate has improved in recent months, with the US and emerging markets leading. However, the UK’s heavy reliance on the Eurozone is constraining prospects with the Eurozone set for a prolonged period of weakness. While we expect manufacturing activity to pick up this year, progress is likely to be painfully slow.”