INSTANT VIEW 8-UK Aug factory output falls, trade deficit widens

LONDON, Oct 9 (Reuters) - British factory output fell morethan expected in August and the country's trade deficit widenedsharply, data showed on Tuesday, dampening prospects of asustained recovery in the second half of 2012.

Following is a summary of the data and economists'reactions.


"The trade data shows modest performance of the exportssector, a small drop in goods exports but the main news is apick-up in goods imports and that's lead to a widening of thetrade deficit.

"Now that stands somewhat in contrast to a story of weakeconomic growth in the UK, but as of now, the weak manufacturingdata is saying one story and the bigger deficit is tellinganother story, so we'll have to wait for more clarity to reallyget a sense of the strength of the economy.

"We think growth will be 0.5 percent or so (in Q3 GDP) butthat's just a simple bounceback from a very weak Q2. Theunderlying growth picture is still fairly weak or modest, butthere are lots of question marks in the detail of the data andthat will probably get ironed out over time."


"The (production) data's certainly quite weak on the monthbut it seems that we are overegging the weakness in the figures.We saw some really choppy figures in previous months, it seemsin this data as if we might expect the reprecussions tocontinue. I expect that the underlying trend is downward, butit's not as bad as this data looks.

"I think we are certainly looking to exit the recession (inQ3), but I think predictions that we might be looking at agrowth rate of over 1 percent will be pared back after today.

"Even if industrial output was flat in September we'd stillbe looking at a growth rate of 1.3 per cent in Q3.

"Too early to say what we'll be looking at in the fourthquarter. Some issues regarding energy output will start tounwind in the coming months, and there should be some upsidethere.

"The interal side of the economy isn't exactly galloping,but we're still moving forward. We can expect a decent level ofgrowth in the third quarter, and then something more modest inQ4."


"August's weak UK industrial production and trade figuresindicate that the underlying trend in GDP is flat at best andtherefore undermine hopes that the 'green shoots' of economicrecovery are emerging.

"Admittedly, economic activity has been volatile in the lastcouple of months, mainly due to June's extra bank holiday.Nonetheless, the underlying trend in output seems to be slightlydown.

"Both industrial production and exports were lower in Augustthan in May - the last monthly figure that was unaffected by theJubilee distortions. So, although GDP should see a technicalbounce-back from the bank holiday in Q3, today's figures suggestthat the underlying picture is still very weak."


"Today's IP report doesn't show any major surprise. UKmanufacturing activity remained under pressure in August,despite the solid increase in business confidence (i.e PMI).

"The annual pace of decline of the manufacturing sector hasbeen moving in a narrow range since the start of the year,suggesting a negative contribution to GDP growth.

"In Q3, IP might provide a boost to GDP growth as theaverage figures incorporate the technical rebound seen in July.However, the picture for manufacturing activity remains sluggishfor the remainder of the year as demand from abroad is underpressure and companies are generally sceptical to revise theirinvestment plans in the current uncertain environment."


"The manufacturing number does look somewhat weak and ismore consistent with the weakness we've seen in the broadersurvey data. Certainly it looks like the manufacturing sector isstruggling and being affected by the very weak euro area economyand weak global backdrop.

"(But) the figures aren't too concerning for the Q3 GDPfigures which we still expect to show a decent bounce.

"We think we will see the UK exit a recession in the Q3figures, the question is how much of a drag industrialproduction and manufacturing are on that. But certainly, there'senough evidence there to suggest that services will be enough topull us out of recession in those Q3 figures."

On trade data:

"What we think we've seen is a bit of correction from therespectable trade deficit that we saw in July. Exports againlook to be pretty weak, they slump on the month and any hopesthat we'll see a significant improvement over the months aheadare likely to be well overdone because the global backdropremains pretty tough and exports are going to struggle."


"The industrial output was disappointing but not a majorsurprise. Overall it was down half a per cent, but I wasexpecting a bit worse.

"So if you factor that into the likely GDP output for Q3,we'll be looking at a gain of about three quarters of a percent.We ought to know much more when the construction industry datacomes out next week.

"As for Q4, it's obviously very early days, but once thelights went out on the closing ceremony of the Olympics, we werelooking for a bit of payback.

"There's still time for the growth surveys to improve andget the economy back on track."


"I am not surprised to see a dip in the manufacturingnumbers given that we had an exaggerated bounce the previousmonth. It's heartening to see a little bit of continuing growthin North Sea oil and gas output, which I think is still on adownward trend."

******************************************************* MANUFACTURING OUTPUT AUG JULY (PRV JULY) FCAST Mth-on-mth change in pct -1.1 3.1 (3.2) -0.6 Yr-on-yr change -1.2 -0.7 (-0.5) -0.6 3-mth/3-mth change -0.7 0.1 (0.2) INDUSTRIAL PRODUCTION Mth-on-mth change in pct -0.5 2.8 (2.9) -0.5 Yr-on-yr change -1.2 -0.8 (-0.8) -1.1 3-mth/3-mth change -0.1 UNCH (UNCH) TRADE FIGURES AUG JULY FCAST Goods balance -9.844 -7.337 (-7.149) -8.50 Non-EU goods balance -4.972 -2.929 (-2.877) -4.00 EU 27 goods balance -4.872 -4.408 (-4.272)

- Biggest total goods and services trade deficit sinceApril 2012, second-highest on record

(Reporting by Li-mei Hoang, Peter Schwartzstein and OlesyaDmitracova)

((olesya.dmitracova@thomsonreuters.com; +44 20 7542 8051;Reuters Messaging:olesya.dmitracova.thomsonreuters.com@reuters.net))