Index of production
On Tuesday, the ONS will release data on production and manufacturing output for August. Manufacturing started the third quarter on a strong footing, with output up by 0.5% month-on-month and by +1.9% year-on-year in July. Capital goods continued to drive growth in manufacturing numbers, while the intermediate and consumer-related sectors continued to be under pressure.
EEF's Manufacturing Outlook for 2017q3 as well as manufacturing PMI figures are all pointing towards a sector in good health with output and orders indicators at historic highs. Yet the momentum seen in these surveys has not materialised in terms of stronger output so far this year, partly because the high volatility in some manufacturing subsectors (automotive and pharmaceuticals) are weighing on the sector's overall growth performance. We expect this drag to unwind however, and August numbers will help draw a better picture of the sector's performance in the third quarter.
Data on trade are also due on Tuesday. The latest data have seen exports going from strength to strength, up 4.1% in volume terms in July compared with the previous month. UK manufacturers are benefiting from the revival in world markets, a trend that is broad-based across all subsectors as EEF's Manufacturing Outlook had suggested. In addition, the benefits of the weak pound seem to have materialised in the form of improved margins on export sales. We expect the boom in overseas sales and the recovery in export margins to continue in August.