Weakening UK economic data casts doubt on Bank of England rates hike

Output by UK factories has fallen unexpectedly in the last couple of months, indicating that the economy’s growth rate slowed, and casting doubt on the likelihood that the Bank of England will raise interest rates later this year.

Weak Market Data

This latest raft of weak data comes as businesses are asking the Prime Minister to negotiate a soft Brexit, keeping the UK in the single market for a transitional period. The figures saw the GBP falling against the Euro and British government bond prices rising.

The Office for National Statistics reported that manufacturing output fell by a monthly 0.2%, which effectively cancelled out April’s rise, flying in the face of a predicted rise touted by Reuters’ economists. The stats showed a much worse than expected construction figure. The figures come on the back of slowdown in early 2017, following the shock of the referendum decision in June last year.

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Cautious Consumer Spending

As inflation has risen, pushed up by the falling pound following the Brexit vote, consumers have become cautious, reining in their spending. Manufacturing figures were affected by a 4.4% fall in the production of motor vehicles. This figure reflected the fall in new car registrations. The Halifax also said that house prices had risen at their slowest rate for four years, possibly influenced by uncertainty in consumers.

However, despite this, some BOE policymakers are pushing for the first rise in interest rates for a decade.

Export Figures Higher

Despite the slow economy, things look brighter for exports. The UK goods trade deficit increased to £11.9 billion in May, from £10.6 billion in April, wider than all the forecasts previously put forward by Reuters pollsters.

In terms of the volume of goods that were exported in the three months up to May, a brighter picture emerged with a 3.8% increase being seen. Import volumes rose by just 2.8% over the same period of time.

All of these statistics and findings make the interpretation of trading signals tricky for investors, so perhaps caution is advised until a clearer steer on Brexit terms becomes available and consumer confidence returns.