Policy Research in Macroeconomics

Weak July for UK industrial production and trade

Two reports published today by the Office of National Statistics (ONS) show relatively weak UK data for the month of July – in production (including manufacturing) and in trade in goods and services.  The July data (if confirmed in the coming weeks) are likely to have a slight braking effect on GDP for the third Quarter of 2015.

In a nutshell, July production fell 0.4% from the June figure, with manufacturing falling 0.8% on the month.  The trade deficit for goods and services widened by £2.6 billion over the June figure.

July production figures

Total production output decreased by 0.4% in July 2015 compared with June. Manufacturing (by far the largest sector) fell by 0.8% – the largest fall since May 2014.  Mining and quarrying increased slightly but within this, oil and gas extraction fell a little (for a second month). Supply of electricity, gas, water, waste management  etc. all rose.

Looking at the position compared to a year ago, total production output is estimated to have increased by 0.8% in July 2015 compared with July 2014. The largest positive contribution was from
mining & quarrying, which increased by 6.7% – mainly due to oil and gas extraction, which is up a big 9% over the year despite recent falls.

However, manufacturing output actually decreased by 0.5% in July 2015 compared with July 2014. This is a strong indication that the aim of having a more balanced economy is far from being realised. The largest contribution to the decrease came from the manufacture of machinery & equipment, down 15.9%.

Taking the last 3 months to July 2015 compared to the same months in 2014, total production is up 1.4%, due heavily to the increase in oil and gas production.  Manufacturing is up just 0.4% over the year, far below the rate of increase in GDP as a whole.

For the 3 months to July 2015, production and manufacturing were down 9.3% and 5.2% respectively from the pre-crisis GDP peak in Quarter 1 2008. 

July trade figures

The UK’s deficit on trade in goods and services was estimated at £3.4 billion in July 2015, a widening of £2.6 billion compared with June. This is due to an increased deficit in goods, up from £8.5 billion in June to £11.1 billion in July.

Exports of goods decreased by £2.3 billion to £22.8 billion in July, the lowest export figure since September 2010. This is due in particular to decreases in semi-manufactures (notably chemicals) of £1.0 billion and finished manufactures of £0.8 billion. 

Imports of goods increased by £0.3 billion to £33.9 billion over the same period.

However, one month figures are not always indicative a bigger trend – it is preferable also to look at the quarterly position.

In the 3-months to July 2015, the UK’s deficit on trade in goods and services was estimated to have been £4.7 billion; narrowing by £4.1 billion when compared with the 3-months to April 2015.  Thus the July figures have fallen a long way back from a more positive position in recent months.

In the 3-months to July 2015, the trade in goods deficit narrowed by £3.8 billion to £27.8 billion.
Exports increased by £1.2 billion to £73.2 billion, and imports decreased by £2.6 billion to £101.0 billion over the same period. 

The decrease in imports for the 3-months to July 2015 is due to a £2.5 billion decrease in non-EU imports, the lowest 3-monthly non-EU import figure since June 2010. This results from decreases in finished manufactures of £1.4 billion, and semi-manufactures of £0.4 billion.

In the 3-months to July 2015, the trade in services surplus widened by £0.3 billion to £23.0 billion, with an increase of £0.1 billion in exports and a decrease of £0.1 billion in imports.

Excluding oil, in July exports fell by almost £2 billion, or 8.6% compared to June, while imports increased by £568 million (1.8%).  Again, the 3 month figures are less severe – exports fell 0.2% compared to the previous 3 months, while imports fell by a bigger 2.5%.  Year on year, however, exports of goods excluding oil rose by a reasonably healthy 3.9%, while imports dipped slightly.

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