UK industrial production unexpectedly declined in August, dragged by mining and quarrying

Data from the Office for National Statistics released earlier today showed that UK industrial production unexpectedly declined in August. Industrial production fell 0.4 percent month-over-month, missing expectations of a 0.1 percent increase. The main drag was from mining and quarrying, which slid 3.7 percent. On the year, it rose 0.7 percent, less than the 1.3 percent rise forecasted.

Details of the report showed manufacturing production was up 0.2 percent on the month compared to expectations of a 0.4 percent increase. It rose 0.5 percent on the year, missing expectations of a 0.8 percent gain. Manufacturing output has seen a cumulative 1.8 percent decline over the preceding three months and the small uptick in August only partly reversed the cumulative decline suggesting UK manufacturing still remains in the doldrums.

Today’s industrial production report is the first disappointing piece of “hard” data post-referendum Q3 quarter.  After witnessing a sharp 2.1 percent quarterly gain in industrial activity in Q2, the industrial sector looks set to drag on GDP growth in Q3, sterling’s export-supportive declines notwithstanding.

"Following a strong start to the quarter, notably in the services sector, GDP growth for Q3 should still post a 0.4% q/q or so gain. But the weakness of today’s report is a reminder that solid early Q3 momentum does not imply that the UK’s post-referendum economic outlook is overall unscathed," said Lloyds Bank in a report.