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!