Pound Gains above 1.30, Further Devaluation Forecast

The UK’s Office of National Statistics have revealed that industrial output in the UK has fallen month on month by 0.5% in May, but this was less than what was forecast by many analysts, who expected a deeper fall.

There were decreases in three of the four main sectors, and the most significant drop in production came in the manufacturing sector, which declined by 0.5%, and was attributed to contributing a total of minus 0.3 percentage points to the level of total production.

The most damage within the manufacturing sector, came from the pharmaceutical products & pharmaceutical preparations industry, which decreased by 6.5%, having increased in the previous month by 9%.

Year on year, the latest data did provide more positive news, as there was a rise of 1.4% in May, compared to the same corresponding month last year, in a reverse of the monthly figures, there was an increase in three of the four main sectors, with an 0.5% hike in manufacturing.

The month on month figures are thought to paint a more realistic picture of the current uncertainty in the UK economy, in the aftermath of ‘Brexit’.

House price growth has eased in June to 8.4%, according to major UK mortgage lenders Halifax, and the quarterly growth rate in house value has fallen to its lowest level of 1.2%, which is the slowest since December 2014.

The results of the latest housing survey preceded ‘Brexit’, so it remains unclear just what the effect on house prices will be from leaving the European Union, but the prospects for them look bleak, if there continues to an economic downturn, as many indicators currently show.

After falling to new 31 year lows against the dollar, the pound managed to stabilise itself, as the GBP/USD rate rose above $1.30, so far this morning GMT sterling has managed to brush the $1.30 mark, although the effects of the industrial production levels are unclear.

Against the euro, the pound strengthened itself to 1.173 euros this morning, after starting the day as low as 1.62 euros.

Deutsche Bank have forecast more pain for sterling, and has predicted for a further decline towards $1.15 against the dollar and 1.11 against the euro, as Brexit bites, this view was also backed by Goldman Sachs, and the Citigroup.

Its is believed that the pound will drop to those levels by the end of next year, and the UK economy is going to need a greater amount of inflows of investment in the short and long term, to evade the currency weakness that is forecast.

Germany Also Suffers Decline in Industrial Production

Industrial production has fallen in Germany in May by 1.3% from the previous month, according to official data, a disappointing decline from the figures for April, which revealed a 0.5% boost in production compared to March.

Production in industry excluding energy and construction was down by 1.8% for last month, whereas within industry, the production of capital goods decreased by 3.9%, followed by the production of intermediate goods, which fell by 0.3%.

The production of consumer goods increased by 0.5%, energy production hiked by 3.9% in May 2016, while the volume production in construction decreased by 0.9%.