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GBP: CBI Positive on UK Manufacturing, Sterling Flat Ahead of GDP

GBP: CBI Positive on UK Manufacturing, Sterling Flat Ahead of GDP

Nick Cawley, Strategist

Talking Points

- UK manufacturers are upbeat about the coming months.

- UK Q2 growth is expected to be weighed down by lower consumer spending.

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Production at UK manufacturing firms grew at the fastest pace since January 1995 in the three months to July, according to the latest survey from the Confederation of British Industry (CBI). The quarterly survey also showed that output growth is expected to continue to grow strongly in the quarter ahead while manufacturers are upbeat about prospects for overall demand.

Business optimism rose to 5 form a prior 1 and against expectations of 0, while total orders slipped to 10 from 16 and missing expectations of 12.

Rain Newton-Smith, CBI Chief Economist, wrote, “Output growth among UK manufacturers is the highest we’ve seen since the mid ‘90s, prompting the strongest hiring spree we’ve seen in the last three years. Cost pressures are easing and firms are upbeat about the outlook for export orders. It’s great to see the benefits from the decline in sterling for UK exporters feeding through.

Newton-Smith added that the flipside is the broader hit to consumer spending power across the economy from stronger inflation, which is likely to have fueled the slowdown in the economy in Q1 and is expected to pull down growth in Q2. UK Q2 GDP is released tomorrow and analysts expect a marginal uptick from Q1’s weak 0.2%.

And you can join me here for live coverage of the UK Q2 GDP release on Wednesday July 26.

GBPUSD moved marginally higher on the release but remains in wait-and-see mode ahead of Wednesday’s data.

Chart: GBPUSD Daily Timeframe (March 25 - July 25, 2017)

GBP: CBI Positive on UK Manufacturing, Sterling Flat Ahead of GDP

Chart by IG

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--- Written by Nick Cawley, Analyst

To contact Nick, email him at nicholas.cawley@ig.com

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