Whilst the ramifications of a potential break-up of the UK put Sterling and stocks under pressure, data just released shows that the UK has enjoyed its biggest increase in six months in July. The Office for National Statistics (ONS) says that industrial output climbed by 0.5% in July on top of a 0.3% increase in June. Increased electricity generation contributed to the rise.
The performance exceeded analysts’ expectations as they had expected a similar level of increase to the June figure. Commenting on the data, Markit’s chief economist Chris Williamson was sanguine: “Business surveys suggest that factories have struggled over the summer compared to the strong growth enjoyed earlier in the year… the slowdown in manufacturing raises concerns that the wider economy may also weaken in coming months.” He noted that UK industrial output was still lagging 7.2% behind the level seen prior to the global financial crisis.
Other data from the ONS showed that Britain’s balance of trade deficit for goods had widened to £10.2 billion in July, up by £0.8 billion on the June figure, to stand at its worst level for more than two years. UK exports were up by £0.5 billion in July, but the value of imported goods rose more strongly.
Sections of British commerce have suggested that UK exports have been hurt by the strong pound this year. Uncertainty over the Scottish referendum has reversed this trend lately, making UK exports cheaper in importing markets. However, the more credible explanation is that UK exports have been relatively week due to subdued demand within the rest of the EU which represents the UK’s largest trading partner. This situation would also not be helped by the strengthening of the Pound against a weak Euro, of course as the factors are clearly related to a greater or lesser extent. Trading within the Eurozone is unaffected by the value of the single currency, of course which is a major appeal of the single currency.
