U.K. manufacturing output likely to have increased sequentially in August

Manufacturing output in the U.K. has been performing quite erratically this year, even before the referendum. Admittedly, manufacturing rose sharply by 2.4 percent sequentially in April and then dropped in each of the three subsequent months by a total of 1.6 percent. Hence it is tough to attribute the declines in June and July to a Brexit effect.

The CBI Industrial Trends survey has signalled a decline in output growth, but to a still-positive rate. Meanwhile, the manufacturing PMI output index rose quite above the pre-vole level in line with a quite a large month-on-month gain. Thus, both the surveys indicate a rebound in output in August, said Societe Generale in a research note.

“We predict that manufacturing output will have risen by 1.5 percent mom but caution that the margin of error in this forecast is unusually large”, added Societe Generale.

Meanwhile, the August trade balance is likely to remain close to July level. The monthly fluctuation in the trade in goods and services balance is mostly due to goods balance. The good balance excluding oil and erratic items showed an unusual reduction in the deficit in July that is expected to be reversed in August; however, in contrast, the erratic deficit has moved above the recent trend, noted Societe Generale. Movements in these two are likely to counteract each other so, with the oil balance being stable; the overall trade balance should also be slightly changed.

“Thus we predict that the trade deficit will have remained at £4.5bn in August”, noted Societe Generale.