Tuesday, August 15, 2017

The UK government has published a document on future customs arrangements with the EU, in which two possible models are floated. The first of these involves a ‘highly streamlined’ system in which existing procedures are largely maintained alongside ‘technology-based solutions to make it easier to comply with customs procedures’.

The second involves the UK mirroring EU procedures when imports that will subsequently be exported to the EU enter the UK – thus allowing seamless movement of products between the UK and EU. Just how anybody will know which imports will later be exported is anyone’s guess. The government’s document refers to ‘simplifications for business, such as self-assessment’… which sounds a lot like complications for business.

The opportunities that will exist to strike trade deals with third party countries undoubtedly offer the UK some potential to benefit. This comes, however, at a cost – most notably bureaucracy. Clearly the UK should not be able to import products from a third country with a tariff that is lower than that applied by the EU, simply to export them to the EU without tariff. But it might be possible for UK businesses to process these products and sell their output to the EU at zero tariff. A call must then be made in determining how much processing or modification is needed in order to qualify a product for tariff-free export to the EU. Hence the need for rules of origin. Devising and subsequently implementing these rules is a huge undertaking – though technology (elsewhere in the document described as involving a ‘risk-based and intelligence-led’ approach) can certainly, albeit with imperfection, help.

The first option presented by the government’s document could be highly streamlined indeed if the UK were to be free to strike its own trade deals but did not take advantage of that freedom, and if it inherited all the trade arrangements already made by the EU (unlikely though this scenario might be). The existing customs union would then remain in all but name. A somewhat less streamlined mechanism would allow exceptions, albeit at cost that would need to be balanced against the benefits.

Whatever final arrangements are agreed, the UK government is proposing a transitional period. And – noting the British penchant for solving problems by changing the name – whatever it is called, at least the transitional arrangements should look very much like the customs union that currently exists.

Thursday, August 10, 2017

Industrial production in June of this year stands at 0.3% above the level a year earlier. Despite the fact that output in June was almost 0.6% above that achieved in May, the trend is still one of rather sluggish performance. Indeed, my neural network forecaster predicts a return to negative growth in this series over the coming months. This ties in with recent predictions of slower GDP growth over the coming two years. As ever, caution is needed in interpreting these forecasts, especially given the unusually uncertain environment presented by Brexit negotiations.


Friday, July 07, 2017

The latest data on industrial production have been released and show slight falls (month on month, quarter on quarter, and year on year). This continues the recent trend. My neural network forecaster for this series suggests a likelihood of continued (quite sharp) falls over the coming months, followed by a recovery. The usual caveats apply, of course, especially given the major uncertainties presented by, amongst other things, the Brexit negotiations.

Friday, June 09, 2017

Industrial production fell by 0.8% over the year to April, with particularly sharp falls in the energy and consumer non-durables sectors. This follows forecasts of such a fall on this site in recent months. While the political landscape is now particularly uncertain, forecasting is more than usually hazardous, but the predictions of my neural network model for this series over the next 24 months are reported below.

Thursday, May 11, 2017

Data on industrial production indicate that output growth in this sector slowed in March to 1.4% year on year. This follows sharp declines in each of the previous two months, and on a monthly basis industrial output is now some 1.9% lower than its peak in December of last year. Since there was also a mini-peak in the series in April 2016, it would not be surprising if the year-on-year series were to turn negative next month.

The series, along with predictions for the coming two years from my neural network forecaster, appears in the graph below. As ever, forecasts should be treated with caution, not least given the present political uncertainties.

Friday, March 10, 2017

Following the substantial uptick in manufacturing output fuelled by sterling's depreciation at the end of last year, the January data indicate a month-on-month fall of some 0.9%. This has contributed to a month-on-month fall of 0.4% in total industrial output. Year-on-year, industrial output still shows a large rises, of some 3.2%.

The slowing of output in January leads to another major revision in my neural network forecast for this variable over the coming 24 months - illustrating again that forecasting in such volatile times is a hazardous activity. The latest forecast is shown below - and is clearly more consistent with forecasts produced over the course of most of last year than with the one produced last month.

Friday, February 10, 2017

The latest statistics on industrial production indicate that, compared with a year earlier, output in the production sector in December 2016 had grown by some 1.2%. This spurt of growth is new. Indeed, industrial output grew by over 3.1% over the last 2 months of 2016, following some earlier reverses. The main driver of this growth is in the manufacturing sector, which, over the course of the year, increased output by some 4 per cent. Growth in manufacturing since October has been particularly strong - at 3.5 per cent over the two months alone.

Using these data to update my neural network forecaster for industrial output means that - with the positive annual growth rates recorded in each of November and December of last year - the forecast is now for continued growth over the period to the end of 2018. The depreciation of sterling has clearly given manufacturing exports a boost, and while the series dipped in October of last year this dip has proved to be much milder and shorter-lived than anticipated. The uncertainties brought on by Brexit have clearly made forecasting an even more hazardous activity than usual!