UK Manufacturing Hit by Car Shutdowns, Trade Deficit Surges

British manufacturing output fell hard in July, hit by an earlier than usual summer shutdown of vehicle production lines, and the country’s trade deficit widened sharply, official data showed on Wednesday.

Output in manufacturing contracted by 0.8 percent from June, contrasting with a forecast for a 0.2 percent increase in the Reuters poll of economists.

The weak factory numbers dragged down overall industrial output which showed a fall of 0.4 percent in July when economists had expected a slight increase on the month.

Britain’s manufacturers have struggled to make much headway this year thanks to a combination of weak demand in Europe and other economies around the world and the strengthening of the pound.

A group representing the sector said this week it had halved its forecast for growth this year after overseas orders fell to their lowest since the financial crisis.

The weakness in manufacturing has increased Britain’s dependence on its dominant services sector to power growth in the economy, complicating the challenge for the Bank of England as it ponders when to start raising interest rates.

The Office for National Statistics said manufacturing suffered its first fall in yearly terms in July since August 2013.

“The biggest single factor in the fall in manufacturing was motor vehicle production, with the summer shutdowns appearing to start earlier than usual, along with anecdotal evidence showing a slowdown in exports,” ONS chief economist Joe Grice said.

“There has also been a fall-back in the manufacture of weapons, following a big rise in June.”


Craig Erlam
Based in London, England, Craig Erlam joined OANDA in 2015 as a Market Analyst. With more than five years' experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while conducting macroeconomic commentary. He has been published by The Financial Times, Reuters, the BBC and The Telegraph, and he also appears regularly as a guest commentator on Bloomberg TV, CNBC, FOX Business and BNN. Craig holds a full membership to the Society of Technical Analysts and he is recognized as a Certified Financial Technician by the International Federation of Technical Analysts.