Tuesday, July 10, 2012
Better industrial and trade news - but beware the distortions
Posted by David Smith at 11:00 AM
Category: Thoughts and responses

Manufacturing output rose by 1.2% in May and overall industrial production rose by 1%. But what goes up too often comes down, and these increases are likely to be reversed in June. The reason is that the late-May Bank Holiday was moved from May to June, giving an extra day's output in May, but the loss of a day in June.

Will the June drop be big enough to produce a fall in overall industrial production in the second quarter? Probably. Taking April and May together production was only marginally up on its first quarter level. There's a little more leeway in the manufacturing numbers, but not much. Industrial production is likely to be a drag on second quarter GDP.

Even with the May boost, the numbers are not exactly encouraging. May manufacturing output was down by 1.7% on a year earlier, while overall industrial production was down by 1.6%. More here.

It is less obvious that there should have been a distortion in the trade figures, which showed a narrowing of the overall trade deficit from 4.1 billion in April to 2.7 billion in May and a narrowing of the deficit on goods trade from 9.7 billion to 8.4 billion. Some of the despair that followed April's trade figures was overdone. More here.