Disappointing industrial and trade data suggest weaker growth

THE economy has suffered a triple blow as data showed the trade deficit widening, industrial output falling and construction slowing.

The latest trade data showed little evidence that there is a rebalancing towards manufacturing and exports, with the deficit widening to £8.9bn in the three months to May, from £6.9bn in the previous quarter. The Office for National Statistics said the increase reflected a higher rise in imports than in exports of goods, particularly cars, aircraft and ships, and oil and electrical machinery from non-eu countries. A decrease in services exports also contributed to the decline.

Bank of England policymakers had hoped that an improvement in exports and investment would compensate for a reining in of consumer spending in recent months.

However, Allie Renison, head of Europe and trade policy at the Institute of Directors, said the continued rise in imports showed that domestic demand remained strong.

Separately, manufacturing output edged down by 0.2pc in the month, disappointing forecasts for a modest rise, after car production recorded its biggest fall since February last year, dropping 4.4pc. Wider industrial output also unexpectedly contracted by 0.1pc in May after a 0.2pc rise in April.

In a further blow, construction output fell by 1.2pc in May and by 0.3pc on the year, which the ONS blamed on “falls in both repair and maintenance, and all new work”.

Forecasts had pointed to growth of 0.7pc on the month and 1.1pc on the year. It also fell by 1.2pc in the March to May quarter, the sharpest such drop since Oct 2015. Michael Thirkettle, chief executive of construction and property consultancy Mcbains Cooper, said the fall in output was “extremely unwelcome news for an increasingly fragile looking construction industry”.

Elsewhere, house price growth flattened in the last three months, according to the latest Halifax index. The annual rate of growth over a threemonth average has slumped to 2.6pc, down from 3.3pc in May – the lowest rate since May 2013.

Meanwhile, figures from the National Institute of Economic and Social Research found that the economy barely improved during the second quarter, growing 0.3pc in the three months to June, compared to 0.2pc in the first quarter.