Britain’s manufacturing output declined 2.9 percent in June from May, compared to 4.3 percent fall estimated by economists. The fall was mainly due to extra holidays on the occasion of Queen Elizabeth’s Diamond Jubilee. Though the decline was the steepest since November 2008, it was less than expected, indicating the recession hasn’t been as deep as reported earlier.
The Office of National Statistics (ONS) stated that better than expected results have raised the hopes of upward revision in the second quarter GDP estimates. ONS said that the industrial production shrank 0.9 percent in the first half of this year, compared to 1.3 percent contraction estimated by ONS. Even the countries like Spain and Italy have performed better than UK. Spain’s GDP contracted 0.4 percent during second quarter and Italian economy shrank 0.7 percent in the same period. Is British economy following the path of eurozone?
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The economy still remains in double dip recession, and the GDP has been declining for the straight three quarters. However, putting the Diamond Jubilee effect aside, the economy has almost stagnated in the second quarter. A survey by the manufacturers’ organization, EEF, suggests that the manufacturers’ confidence is still on the lower side, despite certain bright spots in the exports market.
“Any upward GDP revisions could provide a modest boost to sentiment, and would be welcome news for the government,” said John Zhu and Simon Wells, economists at HSBC. “However, even if these upward revisions do happen, the news for policymakers may not be huge, and the U.K. would still be stagnating.”
The U.K.’s economic outlook has worsened as the eurozone debt crisis and government’s austerity programs have curbed domestic demands. The Bank of England is going to release its new forecasts tomorrow.
The Bank of England will be purchasing bonds worth $587 billion (375 billion pounds) with the record low interest rate of 0.5 percent. After the release of manufacturing report by ONS, the pound jumped 0.2 percent against the euro, to 79.30 pence per euro. The British currency is up 0.3 percent against the dollar from yesterday at $1.5654.
Way back in June 2002, when there was an extra day off on the Queen’s Golden Jubilee, along with a double bank holiday, the country’s manufacturing output had dropped 6 percent.