U.K. Industrial Output Rises Marginally; Visible Trade Gap Widens

(RTTNews) - U.K. industrial production grew marginally in June and the visible trade gap increased unexpectedly on higher imports, signaling weak contribution to growth from manufacturing and exports.

Industrial production grew only 0.1 percent on month in June, the Office for National Statistics reported Tuesday. Nonetheless, the increase reversed some of the 0.6 percent fall in May and confounded economists' forecast for a 0.1 percent drop.

At the same time, manufacturing output dropped 0.3 percent, slower than the 0.6 percent decline in May. This is the second consecutive month of decline. Manufacturing output was forecast to drop 0.2 percent in June.

The annual growth in industrial production improved to 1.6 percent, in line with expectations, from 1.4 percent. The largest contribution to growth came from manufacturing.

Manufacturing output gained 0.9 percent, but slower than the 1.5 percent increase seen in May. Economists had forecast a 1.3 percent increase.

In the first quarter, industrial production moved up 2.1 percent from the prior quarter, the fastest since 1999. This increase was unchanged from the forecast contained within the preliminary GDP estimate.

Another report from the ONS today revealed that the visible trade deficit increased unexpectedly to GBP 12.4 billion from a GBP 11.5 billion deficit in May. The deficit was forecast to narrow to GBP 10 billion in June.

This widened deficit reflected a GBP 1.0 billion increase in exports to GBP 24.6 billion and a GBP 1.8 billion increase in imports to GBP 37.0 billion.

The surplus on trade in services remained unchanged at GBP 7.3 billion in June. As a result, the total trade shortfall came in at GBP 5.1 billion versus GBP 4.2 billion in the prior month.

June's figures on industrial production and trade were fairly disappointing, suggesting that April's strong manufacturing growth was not sustained and net trade will probably provide little support to GDP growth in the second quarter, Ruth Gregory, a UK economist at Capital Economics, said.

Based on the production-side approach, GDP expanded 0.6 percent in the second quarter.

The Bank of England last week lowered its key interest rate by a quarter point and expanded monetary stimulus to avert the risk of recession after "Brexit" vote. The bank expects growth to ease to 0.1 percent in the third quarter.