UK economy resilient at end of 2016-manufacturing jumps

UK economy resilient at end of 2016-manufacturing jumps

Editor: Philip Ragner | Tactical Investor

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Britain’s economy remained resilient at the end of last year according to the latest official figures despite the surprise vote in June to leave the European Union.

However 2017 looks likely to be more difficult.

According to the Office for National Statistics (ONS), UK industrial output rose 1.1 percent (4.3 percent year-on-year) in December.

Manufacturing output jumped by 2.1 percent (4.0 percent year-on-year), though that was mostly due to the often volatile pharmaceuticals sector. Construction enjoyed a better than expected 1.8 percent improvement.
But analysts said economic growth is expected to slow this year as rising inflation hits consumer’s spending power.

In addition the prospect of difficult Brexit negotiations with the EU will deter companies from making long-term investments.

Trade deficit

Separate figures from the ONS showed Britain’s trade deficit fell in December.

The ONS said the improvement was largely to due to exports of erratic items such as gold and aircraft parts and there was little evidence that the fall in the value of the pound since the Brexit vote was helping bring down the trade gap.
Excluding the volatile erratic items, Britain’s goods-trade deficit widened in December. Full Story

British manufacturing grew more strongly than expected in December, showing the economy remained resilient to the end of the year despite June’s Brexit vote shock, although 2017 looks likely to be more difficult.
Official data released on Friday also showed the country’s smaller construction sector grew more quickly in December than many economists had forecast, while the trade deficit narrowed.

Britain’s economy was the strongest among the Group of Seven richest nations last year, confounding predictions of a sharp slowdown following the decision by voters to leave the European Union. But it is widely expected to slow this year as rising inflation eats into the spending power of consumers.

The Bank of England has signaled it is in no hurry to raise interest rates from their record low.

Sterling rose after Friday’s data and British government bond futures FLGcv1 modestly extended losses.

“While industrial production and manufacturing output has proved resilient into the end of 2016, its sustainability over 2017 is in question,” Barclays economists Andrzej Szczepaniak and Fabrice Montagne said in a note to clients.

They pointed to soaring inflation pressures and the likelihood that potentially difficult negotiations with the EU will deter companies from making long-term investments.

British Prime Minister Theresa May is due to launch the process of leaving the EU by the end of March.

The main driver of Britain’s growth since in recent years has been the dominant services sector. Full Story



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