Manufacturing on track for a 2% rise in Q2, but second half of 2016 is shaping up to be a difficult period - EY ITEM Club comments

07 July 2016

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  • Producers remain on track for a strong Q2…
  • …with a drop in output in May only partially offsetting April’s surge
  • But this may represent the calm before the storm

Martin Beck, senior economic advisor to the EY ITEM Club, comments:

“Following increases of 2.1% and 2.4% in production and manufacturing output respectively in April, May’s fall of just 0.5% is a surprisingly good outcome.

“The evidence we have from the official data and the business surveys suggests that even in the event of a further monthly decline in June, manufacturing output is on track to rise by almost 2% in Q2. With April’s strong readings for services and construction output also pointing to solid performances from those sectors, it now looks very likely that Q2 GDP growth will come in ahead of Q1’s outturn of 0.4%.

“However, this is likely to be as good as it gets for the producers for some time. While those with a strong export focus will benefit from the steep depreciation of the pound, for the sector as a whole this boost is likely to be swamped by the drag from weaker investment and consumption. The second half of 2016 is shaping up to be a difficult period for manufacturers.”