LAST week's GDP figures were disappointing, showing a 0.7% fall in the second quarter of 2012 according to the preliminary estimate – considerably worse than the consensus expectation that it would fall 0.2%.
The Office for National Statistics noted that the Diamond Jubilee and poor weather will have had a significant impact on the figure. It also acknowledged that uncertainty around the estimation of the Jubilee impact means that there is a greater-than-usual chance that the estimate will be revised.
This is the third-consecutive fall in GDP and the fifth in the last seven quarters. The fall was mainly driven by construction, which dropped 5.2% having fallen 4.9% the previous quarter. However, production and services also fell, by 1.3% and 0.1% respectively.
In contrast, the CBI’s quarterly Industrial Trends Survey suggested that underlying business conditions in UK manufacturing are a little better than implied by the GDP figures.
Firms’ optimism about the general business situation and export situation was broadly unchanged between July and April and there was modest growth in output in the three months to July while orders were broadly unchanged.
Modest growth in both output and orders is anticipated over the next three months. This reflects North East sentiment as we talk to firms in the manufacturing sector.
And on the high street, retailers have reported a third consecutive month of rising year-on-year sales and orders in July.
However, growth slowed by a greater extent than had been expected.
Specific retail sub-sectors saw an increase in year-on-year sales growth, notably furniture and carpets (+62%), clothing (+56%), footwear and leather (+42%) and grocers (+47%). But reflecting the headline trend, all of these sectors saw sales growth slow compared to last month.
Public sector net borrowing (excluding financial interventions and the transfer of the Royal Mail pension scheme) was £4.5bn higher in the fiscal year to June 2012 than it was over April-June 2011. This was an 11.7% increase, compared to the Office for Budget Responsibility’s forecast that borrowing will fall 4.6% over the total fiscal year.
The eurozone purchasing managers index (PMI) was unchanged at 46.4 in July according to the ‘flash’ estimate, implying that the private sector contracted for a seventh-consecutive month.
The manufacturing PMI hit a 37-month low of 44.1, but the rate of decline in services was the weakest in four months.
:: Liz Mayes is assistant regional director of CBI North East.