UK Industrial & Construction Output Fall Unexpectedly

UK industrial production and construction output dropped unexpectedly in May, weighing on the economic growth for the second quarter.

According to data from the Office for National Statistics, industrial output fell 0.1 percent month-on-month in May, confounding expectations for an increase of 0.4 percent and a reversed a 0.2 percent rise registered in April.

Similarly, manufacturing output dropped 0.2 percent, offsetting a 0.2 percent rise in April. Output was forecast to gain 0.5 percent.

The decline in manufacturing was driven by transport equipment that logged the biggest fall in more than a year.

On a yearly basis, industrial production dropped unexpectedly by 0.2 percent, but slower than the 0.8 percent decrease seen in April. Economists had forecast a 0.2 percent increase for May.

Meanwhile, manufacturing output grew 0.4 percent after staying flat a month ago. Nonetheless, the pace of growth was weaker than the expected 1 percent.

Another report from the ONS showed that construction output declined 1.2 percent on a monthly basis in May, in contrast to a 0.7 percent growth economists had forecast. On a yearly basis, construction output slid 0.3 percent.

In a separate communique, the ONS said the trade deficit widened by GBP 1 billion to GBP 3.1 billion in May, reflecting an increase in imports of goods.

The visible trade deficit increased to GBP 11.86 billion from GBP 10.59 billion in April. The expected level was GBP 10.85 billion.

Today's flurry of activity data casts some doubt on the likely strength of the bounce-back in GDP growth in the second quarter and adds to the likelihood that rates will stay on hold at the next monetary policy committee meeting in August, Capital Economics economist Ruth Gregory said.