France Industrial Output Rebounds In May

GETTYThe month-on-month drop in manufacturing included a 4.4 per cent reverse in vehicle production

It forecasts industrial production is likely to have contracted by 0.5 per cent in Q2, with construction output down 1.8 per cent.

The output data comes on the heels of bullish sentiment indicators such as the Ifo index, which showed business morale hit a record high in June.

Forecasts had pointed to growth of 0.7pc on the month and 1.1pc on the year.

"It's all building up a pattern here that says the economy is clearly losing momentum", said Peter Dixon, economist at Commerzbank.

Samuel Tombs, chief United Kingdom economist at Pantheon Macroeconomics, said the industrial production data increased the likelihood of the Bank of England's Monetary Policy Committee keeping interest rates on hold at 0.25 per cent.

Meanwhile the construction industry also endured a hard month, failing to reverse April's 1.1 per cent decline by dropping 1.2 per cent in May against forecasts of 0.5 per cent growth.

Financial markets suggested there was a roughly 1-in-3 chance of a rate hike this year, down from 1-in-2 a week ago.

GETTYThe pound fell yesterday as Britain’s economic growth prospects took a knock
GETTYThe pound fell yesterday as Britain’s economic growth prospects took a knock

Rate-setter Michael Saunders said this week he was "reasonably confident" improving exports and investment would more or less compensate for the consumer slowdown.

The manufacturing figures were hit by a 4.4 per cent drop on the month in motor vehicle production, the biggest fall since February previous year and matching industry figures showing a fall in new auto registrations.

Data published on Thursday had shown strong foreign demand raised industrial orders in May, though the increase was less pronounced than expected.

Similarly, manufacturing output dropped 0.2%, offsetting a 0.2% rise in April.

Trade data for May also looked weak.

The news came as the ONS published figures showing the UK's trade deficit widened by nearly £2bn in the three months May, while industrial production missed expectations.

The widening deficit in May reflected a higher rise in imports than in exports of goods, particularly cars, aircraft and ships, and oil and electrical machinery from non-EU countries, the Office for National Statistics said.




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