The weak UK economy continues to dampen energy demand
The UK’s industrial gas and electricity demand shows little prospect of any imminent recovery after factory production unexpectedly fell in January.
Data from the Office for National Statistics (ONS) confirmed that manufacturing output dropped 0.9 per cent, compared to December, crushing economists’ forecasts of a 0.2 percent increase. Industrial gas and power demand has been estimated to have fallen by more than 10% during 2009. The latest update suggests that this picture is yet to improve – not that you would have known this from the recent and impressive financial updates from British Gas and Scottish & Southern Energy.
Today’s ONS update will have provided additional support to the growing perception that the U.K. economy is at absolute best ‘fragile’ and more realistically ‘critical’. On its own it this would not have been a fundamentally damaging report, particularly given the severe weather conditions of January and the potential impact on consumer demand. However in the face of last month’s export data from China, these statistics paint an increasingly bleak picture for our economy.
Chinese exports were up 46 per cent in February, compared to a year earlier, and this is on the back of a 21 percent increase in January. This impressive performance suggests that a ‘global’ recovery may well be underway, a view that is backed up by the country’s significant increase in coal and oil imports – China is the world’s second largest energy user after the United States.
It had been suggested by some that the collapse in Sterling over the past year, against the Euro and U.S. Dollar, would not necessarily be a bad thing. The weak Pound was supposed to be a key factor in helping U.K. manufacturing benefit from any upturn in the global economy. This analysis looks a little shaky in light of today’s news. There may be some concerns about a return to recession, after extremely modest growth in the last quarter of 2009.
The country’s weak economy, reduced industrial demand and ample supply levels, have undoubtedly contributed to the annual 60 percent drop in wholesale gas and power contract values* – a bearish trend that now looks likely to continue for the foreseeable future. However, it’s debatable how much of this benefit is actually being passed on to industrial and, particularly, domestic consumers!
*Based on the wholesale cost of electricity and gas for the 12 months commencing April 2010.
The views expressed in the posts and comments of this blog do not necessarily reflect those of McKinnon & Clarke or and of its subsidiaries. No information on this blog will be understood as official. McKinnon & Clarke uses their website to express the official opinions and activities of the company.
The weak UK economy continues to dampen energy demand
11
Mar
2010
The UK’s industrial gas and electricity demand shows little prospect of any imminent recovery after factory production unexpectedly fell in January.
Data from the Office for National Statistics (ONS) confirmed that manufacturing output dropped 0.9 per cent, compared to December, crushing economists’ forecasts of a 0.2 percent increase. Industrial gas and power demand has been estimated to have fallen by more than 10% during 2009. The latest update suggests that this picture is yet to improve – not that you would have known this from the recent and impressive financial updates from British Gas and Scottish & Southern Energy.
Today’s ONS update will have provided additional support to the growing perception that the U.K. economy is at absolute best ‘fragile’ and more realistically ‘critical’. On its own it this would not have been a fundamentally damaging report, particularly given the severe weather conditions of January and the potential impact on consumer demand. However in the face of last month’s export data from China, these statistics paint an increasingly bleak picture for our economy.
Chinese exports were up 46 per cent in February, compared to a year earlier, and this is on the back of a 21 percent increase in January. This impressive performance suggests that a ‘global’ recovery may well be underway, a view that is backed up by the country’s significant increase in coal and oil imports – China is the world’s second largest energy user after the United States.
It had been suggested by some that the collapse in Sterling over the past year, against the Euro and U.S. Dollar, would not necessarily be a bad thing. The weak Pound was supposed to be a key factor in helping U.K. manufacturing benefit from any upturn in the global economy. This analysis looks a little shaky in light of today’s news. There may be some concerns about a return to recession, after extremely modest growth in the last quarter of 2009.
The country’s weak economy, reduced industrial demand and ample supply levels, have undoubtedly contributed to the annual 60 percent drop in wholesale gas and power contract values* – a bearish trend that now looks likely to continue for the foreseeable future. However, it’s debatable how much of this benefit is actually being passed on to industrial and, particularly, domestic consumers!
*Based on the wholesale cost of electricity and gas for the 12 months commencing April 2010.
The views expressed in the posts and comments of this blog do not necessarily reflect those of McKinnon & Clarke or and of its subsidiaries. No information on this blog will be understood as official. McKinnon & Clarke uses their website to express the official opinions and activities of the company.