–May manufacturing output +1.8% m/m; +2.8% y/y
–May industrial production +0.9% m/m; -0.8% y/y

LONDON (MNI) – Manufacturing output rose at the fastest monthly
pace for more than a year, as production bounced backed from a weak
April, data released by National Statistics Thursday showed.

The figures confirm that the large April decline was indeed a one
off caused by the extra bank holiday and supply disruption effects from
the Japanese Tsunami, but overall production looks set to be sharply
negative in the second quarter, hitting GDP.

Manufacturing output rose 1.8% on the month in May and was up 2.8%
on the year, the largest monthly rise since March 2010. This was above
the 1.1% median forecast and followed a a revised 1.6% drop in April.

There was a sharp rise in machinery and equipment output of 3.8% on
the month and also large upward effects from other manufacturing and
basic metals and metal products, of 7.2% and 2.9% respectively.

The wider measure of industrial production rose a weaker 0.9% on
the month, with production held back by a sharp fall in oil and gas
output on the month of 5.7% due to maintenance in the North Sea.
Analysts had expected to see a stronger 1.3% rise on the month.

Output of the electricity, water and gas industries rose 1.6% on
the month.

Recent survey evidence from the manufacturing sector has shown a
notable weakening and, while the May figures show a sharp rebound, the
second quarter data are unlikely to make pleasant reading.

It would take a 1% monthly rise in manufacturing output in June to
leave output flat on the quarter in Q2 and anything lower would mean
output would show a quarterly decline.

Industrial production looks set to provide a significant drag on
GDP in Q2. It would require a 4.5% monthly rise in June to put
production flat on the month. Even assuming an optimistic 1.5% rise next
month this would still leave output down 1% on the quarter knocking some
0.2 percentage point off of Q2 quarterly GDP growth.

–London newsroom 4420 7862 7491 email: drobinson@marketnews.com