UK Industrial production contracted sharply in October according to data released today by the ONS with total production declining by 5.21% Y/Y and manufacturing specifically down by 4.86% Y/Y. Trade data released today showed the aggregate deficit expanded to £7.75 billion for the month while the EU specific trade gap narrowed slightly. Although industry accounts for less than an estimated 20% of the UK’s GDP the rapid slowdown still comes as a shock to the system and will inevitably add to employment pressure. Housing data released today painted an equally bleak picture as October prices measured by the DCLG declined 7.4% Y/Y.
Clearly, rate cuts will not be sufficient panacea for the present situation regardless of whether the banking sector actually starts to pass liquidity through to consumers (see our post yesterday which detailed liquidity issues there). Unfortunately, further rate cuts appear to be the only arrow left in the quiver at this point for Brown, Darling, King & Company Ltd.
We remain short the UK equity market via the EWU ETF and continue to see few prospects for revived growth that might stem the tide of the crisis there.