There was more good news for UK manufacturing today with the release of the Index of Production and UK trade data for November.
Index of Production
Manufacturing output got back on track in November, increasing by an impressive 1.3%. This followed what had been a disappointing set of figures in October in which output contracted by a hefty 1%, stalling the post EU Referendum recovery.
As we said at the time, a rebound in manufacturing output was expected (yes economists occasionally get it right) with impressive PMI recordings, as well as EEF’s Manufacturing Outlook Survey pointing to healthy business sentiment in the industry as the year drew to a close.
This was all underpinned by the prevailing weak exchange rate and the boost to manufacturing exports as the positive effects on commoditised sectors starts to filter through to high-value industries as well.
The star performer was the notoriously erratic pharmaceutical sector which saw output expand by a remarkable 11.4%. The pharmaceutical sector is prone to large swings in output, with significant monthly changes, often due to the delivery of large contracts.
However even taking the erratic nature of these figures into account, the expansion in output was widespread across sectors with electrical equipment and rubber and plastic sectors posting notable growth, 3.3% and 2.1% respectively.
This impressive output data happily points to a strong end to the year for manufacturing, and overall growth in 2016, in line with EEF forecasts.
Despite the deficit on trade in goods widening by £2.3 billion from October to November, there was good news for manufacturing with exports up 0.2% from their level in October. Remarkably manufacturing exports in November were up a staggering 17% compared to the same month a year ago.
Again this can be primarily attributed to the pick-up in demand from key export markets, as well as the weaker exchange rate providing a further boost to exports. We expect the benefits from the weaker exchange rate to continue to be felt going in to 2017, as the effects spread across manufacturing sectors.
However with future trade deals shrouded in uncertainty, manufactures will be keeping a close eye on any developments over the coming months, if in fact there are any.