Raft of reports brings mixed news on state of economy

ONS data shows strong growth in manufacturing But optimism countered by fresh construction slide

Output in Britain’s manufacturing sector grew at its fastest pace for a year in July, but the construction industry slumped and the trade gap failed to improve.

Figures from the Office for National Statistics (ONS) yesterday showed the sector outstripped expectations to climb by 0.5 per cent in July, driven in part by the production of new cars.

It came as the manufacturing of motor vehicles, trailers and semi trailers raced ahead during the period, expanding at the fastest rate since March 2009 at 13.7 per cent.

However, Britain’s deficit in goods and services, the gap between exports and imports, was static at £2.9 billion in July, while construction output sank for the fourth month in a row at 0.9 per cent in response to a 1.4 per cent drop in new work.

Kate Davies, ONS senior statistician, said: “Manufacturing remains relatively subdued since the start of the year, though July showed the first significant monthly growth of 2017, with car production increasing partly thanks to new models rolling off the production lines.

“The usual period of summer maintenance of North Sea oil platforms also failed to materialise for a second month running.

“Construction output fell for the fourth month in a row, with private housing-building contracting in July after a strong couple of months.

“The trade deficit was little changed in the three months to July with an increase in imported goods partially offset by an increase in exports of services.

“Exports of goods to the EU increased but this was offset by falling goods exports to the rest of the world.”

The manufacturing jump helped total production rise by 0.2 per cent in July, despite oil and gas extraction dragging on the wider industry by falling 1.4 per cent.

Chris Williamson, IHS Markit’s chief business economist, said: “Further manufacturing growth is expected in August, given the solid survey data, but the manufacturing upturn needs to be looked at in the wider context of sluggish exports, declining construction activity and consumers being squeezed by low wages and rising prices.

“In this respect, the August PMI surveys highlighted how the economy continued to lose momentum as the robust manufacturing performance was countered by slower growth in services and construction. Slowdowns in services and construction are a concern.”

businessdesk@scotsman.com