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New car production boosts manufacturing output

  • 08.09.2017, 20:10,
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By Sunita Patel-Carstairs, Business Reporter
Britain's manufacturing industry recorded its first "significant" growth of the year in July, new figures reveal.
The sector expanded by 0.5%, driven in part by the production of new cars, official data from the Office for National Statistics showed.
The production of motor vehicles, trailers and semi trailers grew at the fastest rate since March 2009 at 13.7%.However, separate ONS data showed the construction industry is continuing to struggle with output falling - for the fourth consecutive month - by 0.9% in July because of a lack of new projects.
New car production boosts manufacturing output

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The construction industry is in decline due to a lack of new commercial projects
There was also little improvement in the trade deficit - the gap between exports and imports - which remained static at €2.9bn.Exports of goods to the EU increased but this was offset by falling goods exports to the rest of the world.Growth in the broader measure of industrial output slowed to 0.2% from 0.5%, due to an easing back in oil and gas extraction after a spike in June.The official manufacturing figures reflect some of the buoyancy of recent surveys, which up until now have suggested the weaker pound since the Brexit vote is proving more of a double-edged sword than hoped for 'made in Britain' - highlighting an impact from higher import costs in the production process.
Earlier this week, UK factories questioned by business advisory firm BDO and EEF, the manufacturers' body, reported bumper order books, suggesting it has taken time for exporters to feel the benefits of sterling's collapse which has also made UK goods more competitive abroad.
New car production boosts manufacturing output

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The services sector represents three-quarters of output
However, this robust manufacturing performance is being countered by slower growth in services - which represents more than three-quarters of output - and construction.Chris Williamson, IHS Markit's chief business economist, said: "While the data suggests the weakened exchange rate may be helping the economy in terms of rebalancing towards exports and goods production, the rate of improvement remains modest."Slowdowns in services and construction are a concern and highlight subdued domestic demand and investment trends."Howard Archer, chief economic Advisor to the EY ITEM Club, said the ONS data "points to a UK economy still struggling to break out of sluggish growth".But Ruth Gregory, of Capital Economics, said: "Looking ahead, the surveys suggest that both manufacturing and export growth should pick up further, while the consumer slowdown should weigh on import volumes. As a result, we remain optimistic that growth should hold up fairly well in the second half of the year, rather than slow."
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