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12 Mar 2013
Forex Flash: Sizable miss for the first UK hard data of 2013 – TD Securities
UK industrial and manufacturing production fell even more that consensus expectations, “but we would caution that the sticker shock is much worse than the underlying trend in the data that remains close to flat”, wrote analyst Tim Davis.
TD Securities analysts explain the fairly broad based decline in manufacturing that wiped out the 1.5% gain in December: “A shutdown in a North Sea oil platform caused the Oil and Gas sector to fall 4.3% in the month, but in fact, the boost for the utilities sectors from the cold weather more than compensated for this hit within the headline IP data and helped the sectors outside of manufacturing, including the platform shutdown, moderate the weakness in this month’s production data”, wrote Davis.
As we move into the spring and if Eurozone and US demand can firm up, the weaker sterling should start to boost manufacturing and strengthen exports, but it is still too soon. "Today’s visible trade deficit unexpectedly improved from £8.7bn to £8.2, but this was driven by an inventory correction in oil imports, and excluding oil and erratics from the data, exports and imports fell and the deficit worsened", Davis continued, pointing to it as a sizable miss for the first UK hard data of 2013, which seems to seal the fate of Q1 GDP to contract "as we track a -0.2% q/q decline, and makes an extension of QE a coin toss now, with just retail sales and PMIs to update the BoE’s view". "The Minutes and the Budget on March 20th now factor as key risks to explain whether is more stimulus to come from the fiscal side and where the hurdles lie to new QE or easing from the MPC", concluded the TD Securities analyst.
TD Securities analysts explain the fairly broad based decline in manufacturing that wiped out the 1.5% gain in December: “A shutdown in a North Sea oil platform caused the Oil and Gas sector to fall 4.3% in the month, but in fact, the boost for the utilities sectors from the cold weather more than compensated for this hit within the headline IP data and helped the sectors outside of manufacturing, including the platform shutdown, moderate the weakness in this month’s production data”, wrote Davis.
As we move into the spring and if Eurozone and US demand can firm up, the weaker sterling should start to boost manufacturing and strengthen exports, but it is still too soon. "Today’s visible trade deficit unexpectedly improved from £8.7bn to £8.2, but this was driven by an inventory correction in oil imports, and excluding oil and erratics from the data, exports and imports fell and the deficit worsened", Davis continued, pointing to it as a sizable miss for the first UK hard data of 2013, which seems to seal the fate of Q1 GDP to contract "as we track a -0.2% q/q decline, and makes an extension of QE a coin toss now, with just retail sales and PMIs to update the BoE’s view". "The Minutes and the Budget on March 20th now factor as key risks to explain whether is more stimulus to come from the fiscal side and where the hurdles lie to new QE or easing from the MPC", concluded the TD Securities analyst.