The pound jumped after manufacturing production figures beat expectations easily and provided another reason to be upbeat about the UK economy. But at $1.25 cable is still trading virtually flat on the day and is about 0.8 cents shy of yesterday’s high. Whatever data we get the pound is completely shackled by the politics at the moment.
Nevertheless, there is plenty to be cheery about UK plc. Industrial production growth hit a six-year high in the final month of 2016, with expansion of 1.1% from November. While slower than the 2.1% seen in Nov, it was miles ahead of the flat growth expected.
Manufacturing output absolutely smashed expectations with growth of 4% from a year before against an expectation of 1.7% yoy expansion. Industrial production was 4.3% higher yoy against an estimate of 3.2%. Construction output was also higher.
And even more encouragingly, trade figures suggest the UK economy is responding to Theresa May’s ‘global Britain’ rallying cry. Exports to non-EU countries are rising – Britain’s economy is adjusting to Brexit realities.
British exports to non-EU countries climbed 17.3% to £43.8 billion in the fourth quarter from the previous three-month period. Exports to the EU rose just 3.5%. The trade balance has narrowed – one of the key benefits that we can expect from a weaker pound. While the narrowing is down to certain ‘erratic’ elements, the important thing is the longer-term export growth trend.
Exports to non-EU countries have nearly doubled in the last 10 years. Exports to the EU are up a lot less – by just over a fifth in that time frame. The EU is becoming a smaller part of Britain’s export market.
So much for the Brexit meltdown – today’s data confirm that the UK economy remains very resilient and lends support to the Bank of England’s decision to revise up its 2017 growth outlook.
It’s very much a risk-on kind of day in the markets after a good session overnight in Asia off the back of sparkling Chinese data and Donald Trump’s ‘phenomenal’ tax plans, which sent US stocks to new all-time highs yesterday. Global growth expectations are rising and this ought to soften the impact of Brexit on Britain.