UK Manufacturing Struggling Against Strong Pound

New doubts have emerged over the UK’s economic outlook after new evidence that growth is reliant on household spending while manufacturers struggle with a strong pound and the fallout from a downturn in China.

UK economic growth is expected to hold up during the second half of this year but a sharp drop in business confidence in recent weeks suggests the momentum is under threat, according to a round-up of indicators from accountants BDO.

Its latest output index for the UK edged up this month, with the main impetus for growth coming from strong consumer spending thanks to rising wages and near-zero inflation. But confidence among businesses fell for the fifth straight month, according to BDO, which produces its optimism index by combining findings from Bank of England regional agents, CBI surveys and the Markit/CIPS purchasing managers reports (PMIs).

“While the expected continued economic growth is encouraging, falling business confidence suggests the UK economy is approaching a turning point,” said BDO partner Peter Hemington.

“The UK cannot rely on consumer spending and services in the long-term. Policymakers must focus on steps to rebalance the economy and give support to manufacturers and greater wealth creation in the north and Midlands.”

via The Guardian

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza