Industrial production rose in Q2, but momentum ebbed away through the quarter - EY ITEM Club comments

9 August 2016

  • Share
  • ONS data confirms a strong Q2 for producers…
  • …but another disappointing quarter for net trade
  • BRC reports suggest degree of resilience in the consumer sector

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

“The June Index of Production figures confirmed that industrial production rose by 2.1% in Q2 but that momentum ebbed away through the quarter.

“June’s trade release, however, was very disappointing, with unfavourable historical revisions and a substantial widening of the trade deficit. This meant that Q2 as a whole saw its worst performance for ten quarters. However, the substantial depreciation of sterling since late June should begin to change this picture over the second half of the year.

“Given that the ONS data largely related to the pre-referendum period, today’s most interesting data was arguably the July Retail Sales Monitor (RSM) from the British Retail Consortium (BRC). This reported that annual growth in sales values accelerated from 0.2% in June to 1.9% in July. Although the month’s warmer weather may have provided some support, the main takeaway was that, despite last week’s gloomy consumer confidence data, thus far Brexit doesn’t appear to have had a material impact on retail sales. If this picture is mirrored by next week’s official retail sales figures then it will reinforce our view that the resilience of the consumer sector will help the wider economy to skirt recession.”