The pound has fallen after disappointing manufacturing, trade and construction data suggested the UK economy is failing to gain momentum. Output in both the manufacturing and construction sectors fell in May, according to the Office for National Statistics (ONS).
Separate data from the ONS showed that the UK's trade deficit widened in May.
Sterling fell 0.7% against the dollar as analysts suggested an early interest rate rise was now less likely. Recent weeks have seen speculation that the Bank of England could raise rates later this year. This followed a surprisingly close vote on interest rate levels at the Bank's last meeting, when three members of the Monetary Policy Committee backed a rate rise. In addition, the Bank of England's chief economist, Andy Haldane, said last week it needed "look seriously" at the possibility of raising interest rates to counter the recent pick-up in inflation.
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. "It's not pointing to a particularly dynamic second quarter. Under those circumstances, the timing of the hawks on the Monetary Policy Committee pushing for a rate hike doesn't look great."
The ONS figures showed that manufacturing output fell by 0.2% compared with April, whereas analysts had expected it to rise.
The sector was hit by a 4.4% drop in car production - the biggest fall since February last year. The wider measure of industrial output fell 0.1% following a 0.2% rise in April. Construction output was also worse than expected. It fell by 1.2% in May from April, and was also down 1.2% in the three months to May - the sharpest such drop since October 2015.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics said: "The construction sector now is feeling acutely the adverse impact of Brexit uncertainty on the willingness of households and firms to make long-term financial commitments. BBC News
0 comments: