Jubilee boosts British economy

Tue, Jul 10, 2012, 01:00

Britain's economy got a lift in May when a holiday was postponed to June to mark the Queen's Diamond Jubilee, a move which then boosted retail sales in June, but the country still looks set for a third quarter of recession.

British manufacturing output rose 1.2 per cent in May, smashing forecasts for no change, as an additional working day due to the postponed public holiday allowed for more work, the Office for National Statistics said.

However, a downward revision to previous months and the extra holiday added to June leaves little chance that output rose on the quarter.

"From the performance of the industrial sector in recent quarters, it appears that the hoped for manufacturing-driven recovery is not likely to materialise in the near term," said Blerina Uruci at Barclays.

A wider reading of industrial output, which includes energy production and mining, was 1.0 per cent higher in May after a 0.4 per cent drop in April. Output was down 0.3 per cent in the three months to May compared to the previous three months.

Britain sank back into recession at the start of the year and the data increases the risk that the overall economy shrank again between April and June.

"With a further downturn in production likely in June, this suggest that manufacturing will have acted as a significant drag on the UK economy in the second quarter, increasing the likelihood that the country will have remained in its double-dip recession for a third successive quarter," said Markit economist Chris Williamson.

Economists in a Reuters poll taken last month predicted 0.1 per cent growth in the second quarter, and tepid growth over the coming year with only a modest bounce in the current quarter from London's hosting of the Olympic Games.

While the extra holidays will drag on production in June they pushed retail sales to rise at their fastest annual pace since December, the British Retail Consortium said.

Sales rose 1.4 per cent in value terms, but that was far weaker than the 2.0 per cent forecast by economists in a Reuters poll as fears about the state of the economy and a wet end to the month led shoppers to keep their hands in their pockets.

Reuters