MNI 5 Things: Manufacturing Set For 10th Straight Mo of Gains

Repeats Story Initially Transmitted at 15:38 GMT Apr 10/11:38 EST Apr 10

     LONDON (MNI) - UK February Short Term Indicators Data Due for Release Weds

     Ahead of the UK February Industrial Production (IOP), Manufacturing,

Construction output and Trade data release, we outline five themes for

particular attention.

           Feb       Feb

      Industri  Industri         Feb          Feb         Feb     Feb        Feb

            al        al  Manufactur  Manufacturi  Constructi   Trade    Visible

      Producti  Producti         ing           ng          on  Balanc      Trade

            on        on      Output       Output      Output       e    Balance

         % M/M     % Y/Y       % M/M        % Y/Y       % M/M  Stg bn     Stg bn

--------------------------------------------------------------------------------

MNI

Medi

an        +0.4      +2.9        +0.2         +3.3         0.7    -2.6      -12.0

Prio

r          1.3       1.6        +0.1         +2.7        -3.4    -3.1      -12.3

     Robust but subdued growth expected for Manufacturing and IOP.

     As MNI's analysis forecast last month, January saw a 23.5% rebound in

mining and quarrying output following the reopening of the Forties oil pipeline.

This, alongside February's colder weather, should have supported industrial

production, leaving growth somewhere in between the rates recorded in December

and January. Whilst the UK manufacturing sector has held up well and is

anticipated to have expanded for a tenth straight month, its momentum appears to

be softening as capacity constraints start to bite and the boost from the lower

exchange rate fades.

     Surveys Signal Resilience. 

     Both the CBI Industrial Trends Survey (ITS) and the IHS Markit

Manufacturing PMI pointed to resilience in the manufacturing sector in February.

The PMI fell marginally in February, from 55.3 to 55.2, where production hitting

an 11-month low was offset by an increase in new orders. The report,

encouragingly, pointed to evidence of increased domestic and external demand.

The ITS also reported a drop in output, with both the total orders balance and

the export orders balance at four-month lows. Both surveys still remain above

their respective long run averages, however, and point to further growth.

     Trade Deficit to Narrow. 

     February may show a slight narrowing of the deficit- primarily due to two

factors- lower oil prices and lower pound still providing some impetus. The UK's

oil deficit has widened by stg1 billion over the past six months but the average

oil price in sterling terms fell from stg50pb in January to stg47bp in February.

In addition, with the Forties oil pipeline up and running again, the UK's

reliance on imported fuel should drop. The boost to net trade from a lower pound

may also have further to run and these two factors combined help explain why

analysts look for a stg0.5bn reduction in the trade deficit to -stg2.6 billion.

All in all, we are yet to see any material improvement in the deficit given

increases in exports, supported by the weaker currency, have been met with

higher imports.

     Car production was down in February. 

     Total car manufacturing was down 4.4% y/y in February and a large portion

of this fall can be attributed to domestic demand continuing to decline, data

from the SMMT showed. Domestic manufacturing fell almost a fifth (-17% y/y).

Lacklustre domestic demand was highlighted by new car registrations in the red

for the 11th straight month in February (March made it 12). The quantity of cars

produced destined for foreign shores also fell in February, down 0.8% on the

year. So, expect the manufacturing component of IOP as well as the visible trade

balance to have been dampened by these figures.

     One-off Shocks to Distort Q1 GDP Data. 

     The Forties closure and February's arctic-like chill will make the Bank of

England's task of trying to gauge underlying UK growth in Q1 slightly more

difficult. Given the former occurred in December last year, contributing to the

0.1pp downgrade in Q4 growth, we know the recovery in the January data will aid

growth in Q1. In contrast, given the arrival of the 'Beast from the East' late

in February and early March, the associated hit and rebound will largely be

captured in the Q1 data. The March PMI showed as expected the construction PMI

taking a big hit from 51.4 to 47.0 and services seeing the weakest rise in

activity for twenty months from 54.5 to 51.7. As a whole, the net impact of

these two unanticipated shocks remains difficult to call.

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

[TOPICS: MTABLE]