UK Manufacturing data improves outlook for Q2 GDP - Lloyds

Analysts from Lloyds Bank point out that the surge in April industrial production in the United Kingdom creates prospects for better data of second quarter GDP growth.

Key Quotes:

“Industrial production surged by 2.0% m/m in April, much stronger than expected (CON & LBCB: 0.0%) and the largest monthly gain since 2012, following a 0.3% m/m rise in production in March.”

“As such, relative to the drag from the industrial sector seen over Q1 – when output shrank by an estimated 0.5% q/q – today’s data hold the prospect of a boost to overall economic activity in Q2.”

“Looking ahead, the weakening in the sterling effective exchange since late 2015 should be consistent with some pick up in manufacturing output in the coming months. Nevertheless, the sheer scale of the April surge means that some pullback is likely in upcoming releases, suggesting that overall GDP growth is still likely to remain overwhelmingly services driven. It is here that we might expect a greater impact of political uncertainty; the first estimate of output in the services sector in April is due on 30th June.”