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Manufacturing falls, and trade gap worsens

On top of the looting and mayhem, the UK economy is suddenly looking very flat indeed. UK manufacturing output fell by 0.4% in June according to figures from the Office for National Statistics. This compares with an increase of 1.8% in May which had led many analysts to expect manufacturing would have risen by about 0.2% in June.

Manufacturing output fell unexpectedly in June

There is obviously a lack of confidence at the moment, and the recent falls in global stock markets could well lead to falling orders and further falls in output and investment.

At the same time separate figures showed that the UK’s overall trade deficit in goods and services increased from £4.0bn in May to £4.5bn in June. This was the widest monthly deficit since December last year.

Although the surplus on services was maintained at £4.4bn, just as it was in May, the deficit on trade in goods increased to £8.9bn, compared with £8.5bn in May. This meant that the overall trade deficit for the second quarter reached £11.3bn compared to £8.5bn in the first quarter of this year.

Given that the austerity measures are reducing consumers’ incomes, it is not surprising that the import of goods fell by £800m in June, but what was surprising was that our exports of goods were down by £1.2bn. With the favourable sterling exchange rate we could have expected exports to perform much better.

The ONS says that the unexpectedly bad manufacturing figures should not have a significant impact on revisions to the second quarter growth figures.

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Posted in Balance of Trade, Exchange Rates, Manufacturing

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