- UK industrial output meets expectations while construction production declines more than expected
- Manufacturing production the brightest spot of today’s data
- GBP remains unimpressed with the release still eyeing this year’s high
The last bag of the macroeconomic data from the UK’s economy this week was fairly mixed. Although, manufacturing production easily beat forecasts, construction output substantially missed the consensus. Having said that, that kind of scenarios could have been expected according to PMIs.
On the surface, the data seems to be neutral for the pound. Manufacturing production rose 1.9% yoy in July against the forecast at 1.7% yoy, marking a meaningful improvement compared to June’s 0.6% yoy. A better than expected reading could have been already priced in by the markets as the latest manufacturing PMI indicated so. Moreover, industrial output was in line with estimations coming in at 0.4% yoy and 0.2% mom, albeit both readings were below their previous values.
On the flip side, construction output marked a hefty decline as it collapsed -0.9% mom and -0.4% yoy clearly missing the forecasts being put at -0.2% and 0.2% respectively. Again, such a bleak release should not have taken investors by surprise. When we take a look at construction PMI, it has marked a massive drop of late. To be precise, there have been three back-to-back falls since May and the latest reading has showed 51.1, the lowest point since August 2016, a second month after the Brexit referendum.
The increases seen on the GBPUSD have been propped up by carnage seen in the greenback which is collapsing in conjunction with US yields. Thus, a move towards 1.3250 seems to be likely. This is especially true when we take into account that the USD’s rout could continue as investors have rushed to US bonds in anticipation of the hurricane Irma which is forecast to haunt Florida during the weekend.