UK Economic Data Is Worsening (FXB)

At a time when the market is clearly buying into the weaker sterling (NYSE: FXB) story, this morning’s January industrial production figures give fresh ammunition.

UK January industrial production contracted by 0.4%, much worse than the +0.3% expected outcome and after a 0.5% reading previously. This left the yearly rate well in negative territory, at -1.5% (from -3.7%). It was a similar story for the manufacturing sector, with production contracting by 0.9% (from +0.9%) and with a yearly rate at a very sluggish 0.2% (from -1.9%). Of course, the poor weather had a lot to do with this highly disappointing performance in the UK industrial sector, but it is not just a weather story.

In fact, yesterday’s highly disappointing January trade figures (and considering the highly manufacturing orientated nature of the UK external sector) hinted at a likely disappointment on the industrial production front too.

Moreover, it should be noted that French January industrial production also released this morning came out on the strong side of expectations (at +1.6% m/m, yet the weather conditions were dreadful in France too in January).