Managing Expectations: U.K. Industrial Production by Jennifer Thomson, Gavekal Capital
The UK’s Office for National Statistics (ONS) released ‘disappointing’ industrial production data earlier today that not only failed to meet market expectations but that showed the manufacturing sector growing at its slowest annual rate in two years (second chart below, light blue line).
The unexpected weakness is, of course, concerning– especially when we consider the potential impact on Q3 GDP figures.
But how does the UK compare to other major economies with respect to industrial output? A look back over different time horizons does not paint a very encouraging picture. Over a twenty-five year period, production in the UK is unchanged (along with Japan). Only France and Italy look worse:
Over the last decade, production has actually declined in many major economies– with the exceptions of Australia, Germany, and the United States:
The only real stand-out since the lows of the great financial crisis is Japan:
With a little perspective on historic trends, today’s UK industrial production data is really not all that surprising– a major improvement would actually be more extraordinary.