The FINANCIAL — British manufacturing output relapsed after two months of growth and dipped in April, official figures showed on June 10, adding to concerns that the U.K. economy failed to pick up speed in the second quarter, according to Nasdaq.
U.K. factories decreased production by 0.4% compared with March, the Office for National Statistics said, which amounted to a 0.2% rise year-on-year. This disappointed forecasts from analysts polled by The Wall Street Journal last week, which were expecting output to rise, albeit at a slower pace than in previous months.
Britain’s manufacturers have struggled to increase production in 2015 and reported a fall in output in January, which was followed by lackluster growth in the next two months. Business surveys suggest the sector is likely to keep grappling with weak exports during the second quarter due to the pound gaining strength against the euro. Although The U.K.’s trade deficit narrowed in April to a one-year low, official data showed Tuesday, exports of goods to the eurozone–Britain’s number one market abroad–remain weak.
The euro has dipped against other major currencies since January when the European Central Bank announced its flagship scheme to buy euro-denominated sovereign bonds–a policy known as quantitative easing or QE. This has driven investors into other currencies, which devalues the euro and makes it easier for European companies to export.
The ONS pointed out, however, that part of the gloomier picture for manufacturing in April was explained by one-off factors: Pharmaceuticals, which are prone to up-and-down swings in production, were the main contributors to the monthly fall in output, after rising by almost the same amount in March.
Also, the overall output of the industrial sector, although still weak, was stronger than economists predicted. Industrial production rose 0.2% on the month and 0.7% year-on-year, as oil fields and offshore pipelines in the British North Sea continued to recover from the global slump in commodity prices and started to operate at a fuller capacity.
Some analysts also hope future official data will show the British industrial sector enjoyed better health in May, once the effects of an uncertain general election had faded.
“The underlying fundamentals for business investment seem decent overall which will hopefully support demand for capital goods, especially now that the risk of political uncertainty and instability has essentially disappeared for the time being following the Conservative’s gaining of a majority in the general election,” said Howard Archer, analyst at IHS Global Insight.
Regardless, weak manufacturing and construction leaves the U.K. economy highly dependent on its service sector, which makes up about 80% of total national output.
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