Respite in U.K. manufacturing likely to be short-lived – Daiwa Capital

After a subdued patch in recent months, the CBI Industrial Trends Survey, released yesterday, pointed to a recovery in manufacturing activity. The factory orders balanced rose to 13 in June from May’s -3, far above market projections and the highest level since January. Growth was widespread, with the CBI recording that output rose in the vast majority of sub-sectors, most notably in food and drink manufacturing and mechanical engineering,

But the rebound might be short-lived, with the output expectations balance weakening to a three-month low of +18. Even with the latest recovery in orders, it is evident from this survey and official data that growth in this sector has moved to a lower rate compared to last year, raising concerns that uncertainty regarding the Brexit landscape might already mean U.K. firms are being ousted from the global supply chain.

The CBI, which has been consistent in asking for more clarity in the future relationship with the EU, warned that Brexit and rising trade tensions threaten future growth in the manufacturing sector. In the meantime, the prices balance dropped to an 11-month low of +13, in line with a more benign inflation outlook, in spite of the recent rise in crude oil prices, noted Daiwa Capital Research Market.

At 20:00 GMT the FxWirePro's Hourly Strength Index of British Pound was neutral at 38.1896, while the FxWirePro's Hourly Strength Index of US Dollar was neutral at 26.1944. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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