The UK's construction output just fell by the most since 2012

Posted July 09, 2017

Samuel Tombs, chief United Kingdom economist at Pantheon Macroeconomics, said the industrial production data increased the likelihood of the Bank of England's Monetary Policy Committee keeping interest rates on hold at 0.25 per cent.

The signs of continued weak growth came as businesses pressed British Prime Minister Theresa May and her government to negotiate a smooth Brexit in two years' time, saying an abrupt departure would deter investment.

Industrial output jumped by 1.2 percent on the month in May, data from the Economy Ministry showed.

Manufacturing production declined 0.2% on the month which was below expectations of 0.5% growth and year-on-year growth was held at 0.4%.

However, reacting to the latest economic figures, Peter Dixon, an economist at Commerzbank, said: "It's all building up a pattern here that says the economy is clearly losing momentum".

"This morning's data paint a rather bleak picture for the United Kingdom economy and underline the challenges lying ahead", said Kay Daniel Neufeld, senior economist at the Centre for Economics and Business Research.

Output in the sector also fell 1.2 per cent in the three months to May, its fourth quarterly fall in a row, and its biggest drop since September 2012.

Financial markets suggested there was a roughly 1-in-3 chance of a rate hike this year, down from 1-in-2 a week ago.

Output data shows declines of 0.1 per cent for industrial production month-on-month and 1.2 per cent for construction.

"Instead of a cliff edge, the United Kingdom needs a bridge to the new European Union deal", said Carolyn Fairbairn, director-general of the Confederation of British Industry. In April, output dropped 0.8 per cent.

Trade data for May also looked weak. By comparison, import volumes rose 2.8 percent over the same period.

The news came as the ONS published figures showing the UK's trade deficit widened by nearly £2bn in the three months May, while industrial production missed expectations. However, business surveys have cast doubt about whether an improvement will be seen in the months ahead.