Industrial output drops in June

The UK's industrial output dropped in June.

According to figures from the Office for National Statistics (ONS), the fall was 0.4 per cent for the month. This followed a slip in oil, gas and mining production and the ONS blamed part of the fall on maintenance in a major oil field.

Despite the drop, total production output is thought to have increased by 1.5 per cent compared to a year ago.

Manufacturing performance "mediocre"

There has been positive movement in the manufacturing sector, which saw an 0.2 per cent increase in June. This indicates some recovery from May, when manufacturing dropped by 0.6 per cent.

Weak demand from Europe, the strength of the pound and sluggish investment have all meant that UK manufacturing has struggled this year.

Although manufacturing has seen growth, David Kern, chief economist at the British Cambers of Commerce called the performance "mediocre".

He noted that output is still significantly less than it was prior to the financial crisis.

"Year-on-year growth is below one per cent and the level of manufacturing output is still almost five per cent below its pre-recession peak in the first quarter of 2008," he told the BBC.

Economist Chris Williamson agrees. He believes that, although there has been a recent rise in manufacturing output, overall outlook is subdued.

"The much-vaunted UK manufacturing revival remains a distant policymakers' dream rather than a reality and the UK economy remains clearly reliant on the service sector as its primary source of growth," he explained.

He indicated that the Bank of England's Monetary Policy Committee (MPC) would find it difficult to decide when to raise interest rates – and this was demonstrated on Thursday (August 6th) when the MPC voted 8-1 to keep rates flat. This was the first time in months the committee hasn't made a unanimous decision in regards to a rate increase.

"The weakness of the [manufacturing] sector presents policymakers with a difficult decision as to whether a surging service sector justifies hiking interest rates or whether growth needs to be more balanced before the economy can safely withstand a tightening of monetary policy," Mr Williamson said.

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.

City Index is a trademark of StoneX Financial Ltd.

The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.