MNI: UK Prelim. Data F'casts: Aug Index of Production, Trade

By Jamie Satchithanantham

     LONDON (MNI) - For the first time this year monthly UK production output

registered back-to-back increases in June and July. Output was up 0.2% m/m in

July and followed the 0.5% m/m rise in June. Manufacturing output, which had

previously failed to deliver a single m/m expansion in 2017, rose 0.5% m/m and

points to a more optimistic outlook for the second half of the year after a

quite dire first. 

     It was the usual suspects, the typically volatile pharmaceutical and

transport components, that drove the July result. Transport equipment output was

up 7.6%, driven by a 13.7% increase (the largest since March 2009) in motor

vehicles, trailers and semi-trailers, preparing for the fleet of new models that

hit showrooms in September. 

     Data from the SMMT, however, has shown a marked fall in car production

starting early this year and this largely explains why the manufacturing data

has been so poor in 2017. The SMMT data show a rise in auto manufacturing in

July though this was followed up with a fall back in August. This pare back will

probably also be replicated in the ONS' data and could imply a slightly softer

expansion in manufacturing output.    

     Elsewhere, a colder than usual August could support utility production

though possibly offset by softer mining and quarrying data; planned closures

were reportedly scheduled at selected North Sea oil fields for maintenance work.

     Overall, the conditions that have supported the recent uplift in the data

-- namely, the weak pound and stronger global demand -- are still in place and

could help extend the recent string of better performances into August.  

     Analysts see industrial production output rising 0.2% m/m in August with

manufacturing output also increasing by the same magnitude.   

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                           Aug         Aug            Aug            Aug

                    Industrial  Industrial  Manufacturing  Manufacturing

                    Production  Production         Output         Output

                         % m/m       % oya          % m/m          % oya

Date Out                10-Oct      10-Oct         10-Oct         10-Oct

Median                     0.2         0.9            0.2            1.9

Forecast High              0.3         1.0            0.4            2.2

Forecast Low                 0           1              0              0

Standard Deviation         0.1         0.2            0.2            0.8

Count                        7           5              6              5

Prior                      0.2         0.4            0.5            1.9

Capital Economics          0.3         1.0            0.2            2.2

Commerzbank                0.2         N/A            N/A            N/A

HSBC                       0.2         0.8            0.2            1.9

Investec                  -0.1         0.6           -0.1            0.3

Nomura                     0.2         0.9            0.2            1.9

Oxford Economics           0.3         1.0            0.4            2.1

UniCredit                  0.1         N/A            0.3            N/A

     The construction sector seems to have been the worst affected by the UK's

decision last year to extract itself from the EU bloc. Major projects have been

put on hold as clients seek clarity amid economic and political uncertainty

before pushing ahead with plans. 

     Output is seemingly on a downward trend and this was further reinforced by

this week's PMI data which saw construction index retreat beneath the 50-mark

for the first time in 11 months, indicating output contracted in September. 

     Analysts see output up from July's -0.9% m/m fall but barely in expansion

at just +0.1% m/m.

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

                             Aug           Aug

                    Construction  Construction

                          Output        Output

                           % m/m         % oya

Date Out                  10-Oct        10-Oct

Median                       0.1           0.4

Consensus                   -0.2           0.0

Forecast High                0.5           0.4

Forecast Low                   0             0

Standard Deviation           0.3           0.2

Count                          4             3

Prior                       -0.9          -0.4

Capital Economics            0.2           0.4

HSBC                         0.5           0.4

Oxford Economics            -0.2           0.0

UniCredit                    0.0           N/A

     In the eye's of analysts, conflicting forces likely left the total trade

balance unchanged in August.  

     A mutual theme running across all soft data surveys in recent months has

been the continued, robust export performance of British firms. Against the

backdrop of the weaker currency and a stronger global landscape, British

exporters have seen demand for their goods pick up; evidence of this,

year-over-year growth in exports have now increased for four consecutive months.

     Imports however have also held up during this time, preventing a narrowing

in the total deficit. Strong retail sales data in August, up 1.0% m/m and 2.4%

y/y, could mean demand for imports also remained high.   

     Analysts see the total trade deficit and the goods trade deficit roughly

unchanged at stg2.8bn and stg11.5bn respectively. 

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

                              Aug      Aug

                            Total  Visible

                    Trade balance    Trade

                           stg bn   stg bn

Date Out                   10-Oct   10-Oct

Median                       -2.8    -11.5

Consensus                    -2.8    -11.2

Forecast High                -2.7    -11.2

Forecast Low                   -3      -12

Standard Deviation            0.2      0.3

Count                           3        4

Prior                        -2.9    -11.6

HSBC                         -2.7    -11.2

Investec                     -2.8    -11.6

Nomura                        N/A    -12.0

Oxford Economics             -3.0    -11.4

     Last week saw the release of the latest national accounts (with the 2017

Blue Book due for release October 31) and with this brought a raft of revisions,

mainly concentrated in UK household spending also affecting the output

components of GDP. 

     Having previously being pencilled in to have contracted 0.3% over the first

half of 2017, manufacturing output was revised up to have grown 0.3%.

Construction data, which was initially published to have contracted 1.3% q/q,

was updated for a smaller 0.5% fall. 

     Likewise, the trade gap between exports and imports was revised lower. From

an initial zero contribution to Q2 GDP growth, net trade was updated to have

contributed 0.4pp to growth. All in all this means back-data from previous

months across these datasets will likely have been subject seen considerable

changes too.      

     This survey will be updated on Monday October 9.

--MNI London Bureau; +44 203-586-2226; email: jamie.satchithanantham@marketnews.com

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