Stronger UK output but Scottish economy slower
Wed: The FTSE100 soared to its highest closing level since August on the back of recovering mining stocks and stronger UK manufacturing figures.
Factory output climbed 0.5% month-on-month in August compared with a 0.8% decline in July and analysts’ expectations for a 0.3% gain, the Office for National Statistics revealed. The rebound was buoyed by increased car production.
“The Bank of England is likely to take some comfort from August’s rebound in industrial production, but it will be concerned by the underlying weakness of manufacturing,” said Howard Archer, chief UK and European economist at IHS Global Insight.
Scotland’s GDP grew by 0.1% in the second quarter of the year, compared with 0.7% UK growth over the same period, according to national statistics.
the Scottish economy has grown for twelve consecutive quarters and output is now 3.0 per cent above its pre-recession peak.
Total output in the economy grew 0.1 per cent for the period April to June 2015 and 1.9 per cent compared to the same quarter last year.
Andy Willox, the Federation of Small Businesses’ (FSB) Scottish policy convenor, said: “Recent evidence from our members revealed a significant dip in small business confidence. Today’s growth figures show that there’s obviously still work to do to get Scotland’s economy firing on all cylinders at a national and local level.
“We need to see Scotland’s decision-makers focus on practical measures to ensure this economic sniffle doesn’t become something more sinister. We need to make Scotland’s local economies less vulnerable to global economic shocks, and in our view, that means developing our small businesses to make local communities more resilient.”
Deputy First Minister John Swinney said the figures showed three years of uninterrupted expansion even against a backdrop of economic challenges and headwinds.
“It is positive to see further growth in the construction sector as a result of continuing strong investment and support from public spending in Scotland. Likewise the healthy expansion in Q2 of the electricity and gas supply sector is a positive story for Scotland’s economy.
“Nonetheless, the figures point to challenges in some sectors as a result of several factors, including subdued demand in the oil and gas sector and a normalising of some very strong trends in recent periods.”
In corporate news SABMiller was 0.3% higher after it rejected an improved £42.15 a share offer from Anheuser-Busch InBev. The shares remain below the offer price, indicating some nervousness over whether a deal would be sealed.
International Consolidated Airlines and EasyJet dropped on rising oil prices and a downgrade by Credit Suisse.
Tesco reversed an earlier decline after reporting a 55% drop in first half operating profit that was better than analysts had expected and after saying the supermarket is on track to make annual profits in line with last year.
Marks & Spencer slumped after JPMorgan Cazenove downgraded the stock to ‘neutral’ from ‘overweight’ and cut its price target to 550p from 600p.
Sports Direct fell after RBC Capital Markets downgraded the company to ‘sector perform’ from’outperform’ and cut its price target to 850p from 900p.
The FTSE100 ended the day up 0.2% at 6,336.35 points – its highest closing level since 20 August.