Industrial production in the United Kingdom fell by 0.5 per cent month-on-month in August and by another 1.2 per cent when compared with levels one year ago, according to the latest data out today from the Office for National Statistics (ONS).
That was roughly as expected by the consensus (-0.5% month-on-month, -1.1% year-on-year).
The main drag on the sector was Manufacturing, while Energy output declined by 0.6%. Those falls were partially offset by the mining and quarrying sector, whose production rose by 1.4%, and an increase of 2.1% in the Water & waste management sector.
Worth noting, ONS warns that the moving bank holidays due to the Diamond Jubilee, and the Olympics, may have impacted the data series.
Manufacturing data possibly distorted
Manufacturing sector output, dropped at a 1.1% month-on-month pace (-1.2 year-on-year), roughly twice the 0.6% fall which had been forecast. Nevertheless, that came after July´s outsized gain of 3.1% month-on-month (which itself was revised down by a tenth of a percentage point).
The largest contributions to the month on month fall came from the manufacture of Transport equipment, which fell by 4.5%, followed by the manufacture of Machinery & equipment which fell by 2.5%.
Of some importance, "there is some anecdotal evidence to suggest that some businesses had longer summer closures in August 2012, or that closures were held later than in previous years so that they affected August exclusively instead of being spread across July and August. In particular this affected month on month movements in the manufacture of transport equipment industries," ONS warns.
In terms of quarterly rates of change production in manufacturing dropped by 0.7% (-1.9% year-on-year).
Finally, and also within Manufacturing, in year-on-year terms output decreased in nine sub sectors and rose in four rose. For this period the largest negative contributions to Manufacturing came from the Chemicals & chemical products (-9.0%), followed by Food, beverages & tobacco (-3%). Conversely, the largest increase came from the manufacture of transport equipment, which rose by 11.0%.
Manufacturing to grow, but not quite enough
This is what economists at Barclays Research are commenting: "The data for the third quarter so far remain consistent with our view that industrial and manufacturing output is likely to rebound during this period after the Jubilee holiday-related weakness observed during the second quarter. However, (...) the manufacturing PMI survey data, which are less likely to be affected by one-off effects related to extra working days, suggest underlying conditions are consistent with falling output. (...)
"Beyond the volatile second and third quarter dynamics, we expect both manufacturing and overall industrial output to continue to grow at a decent pace from the end of the year onwards. However, we do not expect a return to manufacturing output growth similar to the pace seen during 2010 and the beginning of the 2011, which briefly raised hopes of a manufacturing driven recovery."