Industrial Production – Double Dipping
Today’s industrial and manufacturing figures point to a weak out turn for Q2 GDP.
Whilst manufacturing output rose strongly in May, this represents a bounce back form a very weak April – what really matters is looking at the, less volatile, three month on three month growth rates.
Comparing the most recent three months to the previous three months, we see that the overall index of production fell by 1.5% and manufacturing fell by 0.2%.
As the chart below demonstrates we are witnessing a very clear ‘double dip’ in industrial and manufacturing production.
The question is how long will this last? Recent survey evidence suggests the slowdown will continue – with export orders and domestic demand both weak.
Barring an unexpected strong pick up in activity in June it now looks like industrial production will subtract from Q2 GDP, when it is published at the end of the month.
This is worrying given evidence of a concurrent slowdowns in the all important services sector and in the construction sector.
Most observers have revised down their forecast for Q2 growth to 0.3% in recent weeks, today’s evidence suggests it could be even lower.