UK industrial production grows 0.1 pct month-on-month in June

UK’s industrial output grew 0.1 percent on sequential basis in June, consistent with consensus projection of 0.1 percent. June’s figure partially retraces May’s 0.6 percent month-on-month decline in production. In overall production, a pullback in manufacturing of 0.3 percent month-on-month, strengthened the 0.6 percent decline in May, said Lloyds Bank in a research report. Mining and quarrying output offset the drop slightly by rising 1.2 percent.

On a year-on-year basis, UK’s industrial production grew 1.6 percent in June. The annual pace of growth is more than May’s expansion rate of 1.4 percent year-on-year.

The further pullback in June’s activity still rounds off a robust quarter for production following a sharp rise in activity in April, against a backdrop of some weakness in recent industrial indicators. This is in line with the assumptions made in the preliminary GDP estimate for the second quarter with the quarterly growth projected at 2.1 percent. The industrial production of UK expanded 2.1 percent in the second quarter. Manufacturing output rose 1.8 percent.

The strength over the quarter augurs a weaker tone of production activity in the third quarter, according to Lloyds Bank. Manufacturing PMI in the month of July had dropped to softest since February 2013. This was an early indication of the altered economic outlook in the aftermath of Brexit vote. Furthermore, the monthly profile of activity through the second quarter is a headwind for outturns over the third quarter to post any growth in the quarter overall, stated Lloyds Bank.

“By implication, a payback in Q3 will follow the outsized strength in Q2 – one that could add to the Bank of England’s inclinations for further policy easing,” added Lloyds Bank.