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UK June industrial production data elicits scepticism
Tue, 7th Aug 2012 19:20
Industrial output fell in June as companies took a hit from the two days of public holiday set aside for the Queen's Diamond Jubilee celebrations.
Industrial production figures released by the Office for National Statistics, which measure output from the UK's factories and mines, showed a drop of 4.3% compared to June 2011.
However, this wasn't as bad as the 5% analysts had been predicting.
The month-on-month figure was also better than forecast with a drop of 2.5%, compared with the expected figure of 3.4%.
In term of quarterly rates of change industrial production fell by 0.9% in the second quarter of 2012 compared with the first quarter of 2012, making for the third consecutive quarter on quarter fall.
By sub-sectors: Manufacturing output fell by 0.9%, mining & quarrying fell by 4.4% and water & waste management fell by 3.2%. In contrast, energy sector output rose by 5.6% on the quarter.
The ONS said the moving of the late May 2012 bank holiday to June 2012 and the additional bank holiday for the Queen's Diamond Jubilee were likely contributing factors to the month-on-month decline in the production and manufacturing sectors. In fact, it added that the data could see the first estimate of GDP growth for the quarter revised up by a tenth of a percentage point (0.07 percentage points to be more exact), to -0.6% quarter-on-quarter.
Data elicits some scepticism among analysts
Yet analysts were seemingly rather sceptical. Barclays for one pointed out that, "the prior estimates of the Jubilee effect were based on only a single data point - the comparable shift in holidays in 2002 - and it may be that this was a poor guide to this year's effect." Hence the dubiousness of the seasonal adjustment factors employed goes the thinking.
In a similar vein Dr Howard Archer, UK Economist at IHS, said this could not disguise the weakness of the economy.
"Trying to work out just how much of June's drop in output was due to the two days public holiday is frankly a bit of a lottery, especially as production at smaller manufacturers in particular could have been further hit by workers tacking holiday on to take an extended break," he said.
"But there can be little doubt from the size of the drop in output that the underlying performance of the manufacturing sector was very weak in June."
Samuel Tombs, UK Economist at Capital Economics, said June's UK industrial figures suggested that the drop in GDP in the second quarter was likely to be revised up slightly.
The ONS' most recent estimate put the contraction in GDP in the second quarter at 0.7%.
"But the figures do not change the overall picture of a sector struggling to grow in response to rapidly weakening overseas demand," Tombs said.
"This just means that the bounce-back in July may be weaker than otherwise."
He noted the recent figures from Markit's Purchasing Managers' Index, which showed manufacturing production fell at its fastest pace in over two years in July, recording substantial declines in output and new orders.
"As a result, we doubt that industrial production will fully recover from June's drop in the coming months," Tombs said.
AB
Industrial production figures released by the Office for National Statistics, which measure output from the UK's factories and mines, showed a drop of 4.3% compared to June 2011.
However, this wasn't as bad as the 5% analysts had been predicting.
The month-on-month figure was also better than forecast with a drop of 2.5%, compared with the expected figure of 3.4%.
In term of quarterly rates of change industrial production fell by 0.9% in the second quarter of 2012 compared with the first quarter of 2012, making for the third consecutive quarter on quarter fall.
By sub-sectors: Manufacturing output fell by 0.9%, mining & quarrying fell by 4.4% and water & waste management fell by 3.2%. In contrast, energy sector output rose by 5.6% on the quarter.
The ONS said the moving of the late May 2012 bank holiday to June 2012 and the additional bank holiday for the Queen's Diamond Jubilee were likely contributing factors to the month-on-month decline in the production and manufacturing sectors. In fact, it added that the data could see the first estimate of GDP growth for the quarter revised up by a tenth of a percentage point (0.07 percentage points to be more exact), to -0.6% quarter-on-quarter.
Data elicits some scepticism among analysts
Yet analysts were seemingly rather sceptical. Barclays for one pointed out that, "the prior estimates of the Jubilee effect were based on only a single data point - the comparable shift in holidays in 2002 - and it may be that this was a poor guide to this year's effect." Hence the dubiousness of the seasonal adjustment factors employed goes the thinking.
In a similar vein Dr Howard Archer, UK Economist at IHS, said this could not disguise the weakness of the economy.
"Trying to work out just how much of June's drop in output was due to the two days public holiday is frankly a bit of a lottery, especially as production at smaller manufacturers in particular could have been further hit by workers tacking holiday on to take an extended break," he said.
"But there can be little doubt from the size of the drop in output that the underlying performance of the manufacturing sector was very weak in June."
Samuel Tombs, UK Economist at Capital Economics, said June's UK industrial figures suggested that the drop in GDP in the second quarter was likely to be revised up slightly.
The ONS' most recent estimate put the contraction in GDP in the second quarter at 0.7%.
"But the figures do not change the overall picture of a sector struggling to grow in response to rapidly weakening overseas demand," Tombs said.
"This just means that the bounce-back in July may be weaker than otherwise."
He noted the recent figures from Markit's Purchasing Managers' Index, which showed manufacturing production fell at its fastest pace in over two years in July, recording substantial declines in output and new orders.
"As a result, we doubt that industrial production will fully recover from June's drop in the coming months," Tombs said.
AB
