MNI 5 THINGS: UK Construction Output Unlikely To Bounce Back

--UK March Short Term Indicators Data Due for Release Thursday

     LONDON (MNI) - Ahead of the UK March Industrial Production (IOP),

Manufacturing, Construction output and Trade data release, we outline five

themes for particular attention.

           Mar       Mar

      Industri  Industri         Mar          Mar         Mar     Mar        Mar

            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        +0.1      +3.0        -0.2         +2.9        -2.3    -2.0      -11.1

Prio

r         +0.1      +2.2        -0.2         +2.5        -1.2    -1.0      -10.2

     --Surveys, analysts point to flat showing. 

     The March PMIs presented further evidence the UK economy entered a softer

phase of growth, with all three headline indices losing ground on the month. The

manufacturing PMI, though initially showed a marginal gain, was revised down to

54.9 in March, put down largely to a slowdown in new orders. The index went on

to recede further in April, suggesting growth momentum in the sector is slipping

away. The construction PMI, blighted by the bad weather, slipped to a 20-month

low, as did the services survey. Analysts expect the monthly figures to come in

broadly in line with the ONS's own estimates (see point three) while forecast

the trade deficit doubling to 2.0bn.

     Table 1: Purchasing managers' indices

                      February  March  April

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

UK Manufacturing PMI      55.0   54.9   53.9

UK Construction PMI       51.4   47.0   52.5

UK Services PMI           54.5   51.7   52.8

     Data arrives too late for the MPC. 

     Confirmed by the ONS to MNI, the Bank of England Monetary Policy Committee

did not have early access to the Thursday's data during its round of monetary

policy meetings carried out this Tuesday and Wednesday. It was, however, granted

pre-release access to national accounts data, published Tuesday, which detailed

"small" improvements and revisions made by the ONS in advance of this year's

Blue Book, out June 29. Between Q2 1997 and Q4 2016, average quarter on quarter

real GDP growth was unrevised, while the absolute revision to quarter on quarter

real GDP growth was 0.05 percentage points. Average annual real GDP growth

remained unchanged at 2.0%.

     What we already know. 

     The ONS published preliminary month-on-month March estimates for IOP,

manufacturing and construction in its preliminary Q1 GDP growth estimate on

April 27. Table 1 below outlines these forecasts that, assuming no revisions to

the data, are normally the best guide to the month's full-data figures.

Revisions to construction output, up or down, could also drag GDP growth in the

same direction. The sector fell 3.3% on the quarter in Q1 and was knocked off

0.2pp from overall growth. In addition, the trade numbers, also delivered

Thursday, will feed into the expenditure measure of GDP and tell us how much the

trade sector contributed to Q1 GDP. Analysts expect the sector to still have

exerted a drag on growth in Q1 but less so than in Q4 2017.

     Table 2: ONS March estimates taken from preliminary GDP

                             GDP Weight, per                               March

                                        1000  January  February       (forecast)

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

UK Industrial Production,

% m/m                                    140     +1.3      +0.1             +0.1

UK Manufacturing, % m/m                  101      0.0      -0.2             -0.1

UK Construction, % m/m                    61     -3.1      -1.2             -2.3

UK Services, % m/m                       793     +0.1      -0.2             +0.1

     Auto Industry Weighing on Manufacturing. 

     Car production was down 13.3% y/y in March, data from the SMMT revealed

with Mike Hawes, SMMT Chief Executive, branding the figures a "considerable

concern". Of the 147,471 cars produced in the UK in March, just 32,796 were

intended for the domestic market, down almost 20% on the year, while the number

of those destined for foreign shores was down 12%. At 14.3%, transport equipment

is the second biggest sub-category within manufacturing output (second

marginally to food, drink and tobacco) and despite the uninspiring data from the

SMM, official data has shown this category continuing to expand at a fairly

solid rate.

     Weather effects. 

     The mean temperature was 3.8 degrees Celsius in March, some 1.6 degrees

below the 1981-2010 long term average, according to the Met Office. The

below-average-outturn will have been skewed by the exceptionally cold weather

endured in the first week of the month, but the way the ONS collects survey

responses -- firms are not at liberty to report figures on a strict calendar

month basis -- means that changes in activity in March may have washed up in the

February data and via versa. In its output measure of GDP, the ONS said that

while the adverse weather was responsible for around half the slump in quarterly

construction output, there was no such impact seen in the manufacturing sector.

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

[TOPICS: MABPR$,M$B$$$,M$E$$$]