Latest production data gives another sign that UK growth is cooling
Data released today (6 August) by the Office for National Statistics (ONS) showed that UK production output was 1.2% higher in June 2014 compared to the same month in 2013. This result is well down from the three and a half year high of 2.9% annual growth in April, and is the weakest result since the year-on-year contraction posted in August 2013. June’s production output result is marginally lower than that forecast by the ONS in their Q2 2014 GDP initial estimate, although this is too small a difference to make a noticeable impact to the GDP growth figure.
The slowdown in overall production growth this month can be largely attributed to mining and quarrying output falling back into year-on-year decline, and a cooling of expansion in manufacturing output. This leaves the size of the manufacturing sector 7.4% smaller in real terms than the Q1 2008 pre financial crisis peak. The IMF estimates that UK GDP could grow faster this year than any other G7 country, underlining the strength of recovery in the overall UK economy. However, figures highlighted today by the ONS illustrate how manufacturing remains a weak spot for the UK – output in the sector has rebounded much more encouragingly since the start of 2008 in the US, Canada and Germany.
Looking ahead, this slower trend may well continue as figures from the latest ICAEW / Grant Thornton Business Confidence Monitor show that UK manufacturers have much weaker expectations for sales growth over the next twelve months than businesses in the construction and services sectors.
Today’s data release provides another signal that growth in the UK economy is reaching a turning point towards cooling, following the strong rebound seen in recent quarters. This emerging pattern has already been pointed to by both consumer and business confidence survey measures, which have plateaued or started declining in recent months. However, although a slowdown seems likely in the coming months, this should be seen as more of a moderation than a downturn.