U.K. manufacturing output falls sharply in April, BoE unlikely to hike rate in November

U.K. manufacturing output dropped sharply in April. The ONS figures showed that the manufacturing output fell 1.4 percent sequentially. This left the level of output at its lowest since last August, and meant that output was down 0.5 percent three-month-on-three month. The ONS stated “widespread weakness throughout the sector due to a reduction in the growth rate of both export and domestic demand”. It was expected that the stronger overseas markets would offset the recent weakness in domestic demand for consumer goods.

But as the detail from today’s trade data implies there is increasing reason to be worried that pre-Brexit nerves mean that U.K. firms are already being squeezed out of global supply chains, noted Daiwa Capital Market Research in a report.

An increase in the more volatile component of oil and gas extraction of 8.4 percent sequentially restricted the decline in overall IP to 0.8 percent. Slightly more positive, construction activity recorded its first monthly growth in 2018, with output rising 0.5 percent sequentially in April. But this was not enough to improve the dismal underlying trend, with construction activity posting the biggest three-monthly fall in more than five years.

“Together, the two sets of sectoral output data suggest a weak start to Q2, sharply contradicting the BoE Deputy Governor Dave Ramsden's hopes that the slowdown in growth in Q1 was short-lived and weather-related. So, they reinforce our thinking that a rate rise ahead of November is unlikely”, added Daiwa Capital Market Research.  

At 19:00 GMT the FxWirePro's Hourly Strength Index of British Pound was neutral at -37.2605, while the FxWirePro's Hourly Strength Index of US Dollar was neutral at 37.922. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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