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Strong run for UK manufacturing comes to end


UK manufacturing contracted in February after almost a year of expansion, prompting economists to downgrade their expectations for UK economic growth in the first quarter of 2018.

Manufacturing output fell 0.2% compared with January - its first decline since March 2017 - according to the Office for National Statistics. UK manufacturing was bolstered last year by a combination of the weak pound and stronger global growth.

Construction sector output also contracted 1.6% in February, extending January’s decline. The fall was driven by a steep reduction in the volume of infrastructure and took construction’s year-on-year drop to 3%. 

Ruth Gregory, UK economist at Capital Economics, said: “February’s activity data added to the evidence that the economy lost a little pace in [the first quarter].”

Capital Economics is now forecasting a slowdown in economic growth to 0.3% for the first quarter of 2018, down from 0.4% in the previous quarter, with the March snow likely to have hit retailers as well as builders and factories. The National Institute of Economic and Social Research also forecast that growth slowed in the first quarter – to just 0.2%.

Meanwhile, UK retail sales picked up in March despite the cold weather deterring shopping on the high street.

Like-for-like retail sales rose 1.4% compared with a year ago, according to the British Retail Consortium-KPMG retail sales monitor, with food sales up 4.2% on a like-for-like basis in the three months to the end of March.

Helen Dickson, BRC chief executive, said: “There’s no doubt that the ‘Beast from the East’ and its successor played a significant role in deterring shoppers from making store visits. But it didn’t dampen consumers’ appetites towards food purchases, which saw the anticipated spike from the Easter festivities.”

“The divide between food and non-food sales became further pronounced, with food clearly the winner,” added Paul Martin, KPMG head of retail. “The start of 2018 has already seen a list of retail casualties, and with trading conditions unlikely to change in the short-term, retailers are increasingly having to be clear on their point of differentiation. It appears that unless you’re a grocer, bridging the gap between online and off-line sales offers the best means of success in this climate.”

Data from Barclaycard showed annual growth in consumer spending slowed to 2% in March, with store sales down 1.9% but internet spending up more than 11%.

According to Halifax data, the annual rate of house price inflation rose to 2.7% in the three months to March, up from 1.8% in the three months to February. The average house price hit a record of £227,871.

However, research from the Royal Institution of Chartered Surveyors (Rics) found prices were unchanged nationally - and falling in London and the South East. Buyer demand fell for the 12th month in a row in March, while new instructions to agents fell for the 7th successive month. And more than half of London agents reported an increase in sellers withdrawing properties from the market - thought to be because they were unable to achieve their asking prices or preferred to wait for market conditions to improve.

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Important Notes:

Main source of information: Company Report and Accounts, Bloomberg


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