The UK manufacturing and trade numbers for May are an unexpected ray of sunshine on this gloomy Tuesday but, alas, they are mainly down to a spot of temporal jiggery-pokery. No, you haven’t accidentally stumbled onto a Quantum Leap fan page – we mean simply that the customary end of May bank holiday was moved to June.
This means one thing: June figures are likely to be dire, and the second quarter as a whole may reveal a deepening downturn in the economy – probably the worst since 2008.
Still, for now at least, there is brief respite. Manufacturing output for May is up 1.2% in May, following the 0.8% decline in April. This levels out to a 0.2% contraction in manufacturing output for the last quarter (a fair bit better than the 0.8% drop for the three months to April). The trade deficit is looking marginally less green about the gills too, narrowing to £2.7bn in May, due to an increase in exports.
But, and this is a big but, if you look at the trend over the past three months, evening out the volatile dips and peaks, data shows that goods exports actually fell 0.5% in the three months to May, while exports of services fell 1.7%. Imports, conversely, are up 1.8% in the latest three months.
This means that reality is rather more chilling than immediate data suggests. The trade deficit is still worryingly high, approaching the dizzy heights seen at the peak of the financial crisis in 2008. Exports are not going to save our economy’s soul – unless they increase dramatically, and manufacturing is proving more of a drag than a driver.
Unless there is a substantial turnaround in the fortunes of the global economy, more specifically the eurozone economy, the UK will not be able to reverse this trend. Looks like we’re heading into the third successive quarter of this seemingly bottomless double dip…