Sharp fall in UK Manufacturing output in July

UK industrial production posted its second consecutive decline in July, falling by 0.4%, the same magnitude as in June. This print came against consensus expectations of a 0.1% rise and a steeper fall than our forecast of -0.2% m/m. 

"Production was weighed down by a sharp contraction in manufacturing (-0.8% m/m, -0.5pp contribution), its biggest fall since January this year. The manufacture of metals & basic metals (-5.7% m/m; -0.4pp contribution), transport equipment (-2.2% m/m; -0.2pp contribution) and other manufactured products (-3.4% m/m; -0.2pp contribution) were significant detractors to growth", notes Barclays. 

Over 12 months, total production decelerated further, posting slower growth of 0.8% y/y. After a precipitous fall of 3.8% last month, mining & quarrying reported a slight pickup of 0.4% m/m.

Also published this morning, the goods trade report for the month of July showed substantial downside, in particular from exports in consumer goods and outside of the EU. 

The data reveals total exports slowed 9.5% in July, pushing the export level back to its February level and cancelling a strong second quarter which saw exports increase 7.2% q/q. Lower exports were driven by consumer goods and passenger cars falling 13.6% and 12.5% in June.

In terms of geographical distribution, weakness came essentially from exports to non-EU countries falling 15.1% while EU exports contracted only by 3.7% m/m. Trade series in value show regional weakness not only out of China but also North America and oil exporting countries, says Barclays in a research note to its client.