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UK industrial sector grows, but business morale down

London - Data suggests sector on track to contribute to economic growth before Brexit vote

British industrial output expanded at the fastest pace in six years during the three months to May, suggesting the sector was on track to contribute to economic growth before the vote to leave the European Union.
Industrial output rose 1.9 per cent in the three months to May compared with the previous three months, the strongest increase since May 2010 and reflecting strong growth in April. In May alone, industrial output slipped 0.5 per cent, a smaller decrease than the one per cent drop forecast in a Reuters poll of economists.
These figures are likely to be viewed mostly as moot by financial markets after Britain's decision last month to leave the EU, which sent the currency tumbling and has raised fears the country will fall into recession or suffer years of weak growth.
Still, for industrial output to drag on economic growth it in the second quarter, it would have to plummet at least six per cent in June alone - something that has not happened since 1979, the ONS said. Industrial output fell 0.2 per cent in the first quarter, a slightly smaller decrease than the latest economic growth figures suggested.
Britain's overall economy slowed in the first quarter, with the pace of growth easing to 0.4 per cent compared with 0.7 per cent in the previous three months.
Manufacturing output also fell 0.5 per cent month-on-month, again a smaller decrease than economists had expected. The pharmaceutical sector, which surged in April, was one of the main drags. A series of surveys of businesses from Markit/CIPS published last week suggested economic growth was on course to slow to just 0.2 per cent in the April-June period, with most of the data collected before th June 23 referendum.
 
Confidence at 4-1/2-year low
Meanwhile, UK business confidence sank to a 4-1/2-year low in the days after Britons voted to leave the European Union.
A gauge of sentiment slid to six in the wake of the referendum, from 32 in May, according to data compiled by Lloyds Banking Group. While that's the lowest since December 2011, in the midst of the euro-area's sovereign-debt woes, it's still above the lows seen during the global financial crisis. An index of economic optimism plunged to minus-11, the first negative reading since July 2012.
The report adds to initial signs that the June 23 referendum is set to hinder an economy that was already losing momentum. While the ONS says the effects won't appear in the official data until mid-August, a growing number of surveys show pessimism is on the up.