UK manufacturing and industrial production data came in far above expectations in April but was driven by the weaker pound ahead of Britain’s EU referendum and an unusual cold snap in the month, which pushed the numbers higher.
According to the latest figures from the Office of National Statistics, released on Wednesday, industrial production jumped by 2% in April — the most recent data period. That’s up from 0.3% in March, and far above the 0% reading expected.
Manufacturing production also smashed expectations, climbing 2.3%, against March’s o.1%, and an expected growth of 0%.
On a year-on-year basis, both numbers were also big beats, with industrial production growing 1.6% against forecasts of a 0.4% fall. Manufacturing grew 0.8% y-o-y. It was expected to fall by 1.5%.
Here’s the ONS’ chart showing just how big April’s jump was:
While most of Britain’s economic data has been disappointing in recent months — with worries about the upcoming EU referendum frequently cited as the main cause for the slowdown — Wednesday’s numbers are a welcome surprise, even if they may not be signalling a big recovery.
As a note from Pantheon Macroeconomics argues, the data has been driven largely by the weaker pound and an unexpected cold snap in April, and may not continue. Here’s what chief UK economist Samuel Tombs said (emphasis ours):
April’s sharp rise in industrial production provides much-needed support to GDP growth in Q2, but it has shaky foundations. A 3.9% month-to-month surge in electricity and gas output due to the unusually cold weather — average temperatures in April were 0.9 degrees centigrade below its long-run average — contributed 0.34pp to the rise in overall production. Meanwhile, the 2.3% month-to-month jump in manufacturing output likely will be unwind over the coming months.
Nearly one-third of that increase reflected a 8.6% leap in the production of pharmaceutical products, which are volatile. In addition, other categories of production likely were boosted by the recent weakness of the pound. Manufacturers will be hit by a rising pound after a Remain vote, or lower business investment after Brexit. With surveys of manufacturers continuing to point to falling production, it’s simply too soon to conclude that April’s data mark a turning point in the industrial sector’s decline.