U.K. Economy Shrinks as Factory Output Falls Most Since 2002
U.K. manufacturing output fell the most in almost 17 years in April as the boost from Brexit stockpiling evaporated and car producers went ahead with planned shutdowns.
The 3.9% decline, the most since June 2002, saw the economy as a whole shrink for a second straight month, Office for National Statistics figures published Monday show. Vehicle production plunged by a quarter.
Gross domestic product fell 0.4%, the biggest monthly drop since March 2016, leaving the economy at risk of a sharp slowdown this quarter. Growth in the latest three months was a weaker-than-forecast 0.3%, down from 0.5% in the first quarter.
The pound dropped after the figures were published, and was 0.4% lower at $1.2688 as of 9:36 a.m. London time.
Factories boomed in the early months of 2019 as companies stockpiled goods to avoid supply disruptions ahead of the original March 29 deadline to leave the European Union. But with Brexit now delayed until October, orders are being scaled back and demand met from products piled up in warehouses.
In a further blow to the sector, auto makers including BMW and Peugeot brought forward planned shutdowns from the summer in case there were Brexit disruptions. Vehicle output slumped 24%, the most since records began in 1995, though economists expect the loss to be partially recovered in May. There was also widespread weakness in other sectors, led by pharmaceuticals, metals and chemicals.
The figures highlight the fragility of the economic outlook as Brexit uncertainty continues. The weakening backdrop comes as the Conservative Party prepares to pick a new leader, with the leading candidates to succeed Theresa May insisting that a no-deal Brexit -- the scenario businesses fear most -- should remain on the table.
Construction and the dominant services industry failed to provide any support in April, and PMI data last week suggest the economy saw little if any improvement in May.
- Construction fell 0.4% from March and services were unchanged; total industrial production dropped 2.7%, the most since 2012, as maintenance work hit output of oil and gas
- GDP rose 1.3% from a year earlier in April, down from 1.9% in March. Annualized growth in the latest three months was 1.1%
- The trade deficit narrowed to 12.1 billion pounds ($15.4 billion), as imports and exports plunged following stockpiling by both British and European Union companies in the first quarter
- In volume terms, exports fell 10.9% in April, the most since 2006; imports declined 14.4%, the biggest drop since records began in 1998
- Output of transport equipment as a whole fell 13.4%, the biggest drop since 1974
©2019 Bloomberg L.P.