In the absence of almost any corporate news, aside from a trading update by Electrocomponents PLC (LON:ECM), the City’s main focus on Friday will be on a big batch of UK economic data.
With increasing worries over the impact June’s Brexit vote will have on the UK economy, December manufacturing, industrial and construction output numbers, plus latest trade figures, should all illustrate the pressures on British industry.
Industrial production is expected to have increased by 0.4% month-on-month in December, a slowdown after jumping 2.1% month-on-month in November following a drop of 2.0% in October. That would see industrial production up 3.5% year-on-year in December.
Meanwhile manufacturing output is forecast to only rise 0.3% month-on-month in December after rebounding 1.3% month-on-month in November from a drop of 1.0% in October. That would see manufacturing output up 1.7% year-on-year in December.
But construction output is expected to have risen by 1.0% month-on-month in December, after revised drops of 0.1% month-on-month in November and 0.5% in October
Howard Archer, chief UK and European economist at IHS Global Markit, said: “While the latest survey evidence suggests that the manufacturing sector is currently in good shape with strong orders growth boding well for output in the near term at least, there are significant challenges for the manufacturing sector that look likely to intensify as the year progresses.”
He added: “Furthermore, January survey evidence from the purchasing managers was disappointing, showing construction activity stuttering.”
Stering drop ...
But, Archer continued: “On a positive note, the sharp weakening of the pound should provide appreciable help to UK exporters competing in foreign markets.
“However, the weakened pound is substantially pushing up manufacturers’ prices for oil, commodities and imported inputs – which is squeezing margins and increasing pressure to hike prices.”
Illustrating the boost for exporters, the UK’s total trade deficit is expected to have narrowed to £3.6bn in December, after widening to £4.2bn in November from a five-month low of £1.5bn in October.
That would mean that the trade deficit narrowed markedly to £9.3bn in the fourth quarter of 2016 after jumping to a record high of £13.6bn in the third quarter from £7.3bn in the second quarter.
Archer said: “A key hope for the UK economy going forward is that the substantial overall weakening of the pound since the UK voted to leave the European Union in June’s referendum will increasingly feed through to boost foreign demand for UK goods and services.”
Friday’s Agenda
Trading update: Electrocomponents PLC (LON:ECM)