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ECONOMIC DATA THIS WEEK

UK Manufacturing Output, May 2015:  The latest output data from the Office for National Statistics (ONS) showed an increase in industrial production compared to April, but this was mainly because of a sharp increase in oil production which means that manufacturing output actually fell.  However, we prefer to focus on 3-month moving trends to smooth out the monthly variation.

On that basis, total manufacturing output in the latest 3 months (March, April and May 2015) was the same as in the previous period (December 2014, January and February 2015) and was +0.8% higher than a year earlier (March, April and May 2014).  Within the total, output of the Capital Goods industries grew by +0.2% and +1.4% respectively.

Looking in further detail at the key industries which we track regularly, the fastest growth is in Aerospace which was +5.9% higher than in the previous 3 months and +16.5% up on a year earlier;  the Automotive sector expanded by +1.0% and +3.8% respectively.  In May, both of these sectors had output at the highest level since the current series began in 1997.

We had seen some improvement in the Metal Products sector recently, but this industry had a poor month in May and on the 3-month trends was unchanged compared to the previous period, but +4.4% higher than a year ago.  Our concern over the trends for the Machinery industry continue with a further fall in output in May for this industry;  we had some doubts about the data for this sector given the large fall we saw in January, but the latest reduction is harder to explain.  Output was -3.2% lower than in the December 2014 to February 2015 period and -11.7% down on a year ago.

You can get the ONS Statistical Bulletin from their web-site at www.ons.gov.uk or request it from MTA - we have a set of charts that analyse these trends, including an adjustment of the Machinery industry figures, which you can have alongside the raw ONS reports.

Profitability of UK Companies, 1st Quarter 2015:  The latest data from the ONS shows a very sharp fall in the net rate of return for manufacturing companies which was estimated at 6.8% in the 1st quarter of the year;  this compares with 11.4% in the final period of 2014 and 7.9% a year earlier (Q1-2014).

Although the 1st quarter has had the weakest figures in 2013 and 2014, this is a very significant reduction and not really consistent with the investment figures that we reported last week.  The ONS attribute the fall in the net rate of return to a sharp decline in operating surpluses; they also point out that although this series is volatile, this is the sharpest reduction on record going back to 1997;  there is no reference to what might have driven this, but this series is often revised, so we might see a change in future releases.  The net rate of return is defined as the ratio of operating surpluses to capital employed, expressed as percentages.

You can get the ONS Statistical Bulletin from their web-site at www.ons.gov.uk or request it from MTA.

Sales of UK Manufactured Products, 2014:  This data is collected by the ONS through the PRODCOM system at a product level;  this is often shown as “production” figures although this is not strictly correct as it is sales (products sold from stock would only be counted when sold, not when it was manufactured).  The main use we make of this data is to give publicly quoted data on production (and, by calculation, consumption) figures for our industry.

Initial analysis of the data shows that UK “production” of machine tools in 2014 was worth £574.9 million, a reduction of -5.9% compared to 2013.  Cutting tool production was worth £219.0 million, which was -5.8% lower than in 2013;  there was a fall of -10.1% in the production of tool/work-holding equipment which was worth £240.1 million.

Other interesting data from this series is that total production of Machining Products (turned parts and parts made by other machining processes) was worth £5.17 billion, an increase of +10.6% compared to 2013.  For the parallel product category of Forging, Pressing, Stamping and Roll-Forming of Metal, there was a reduction in production of -3.0% to £1.87 billion.

The main format for this data is in our Basic Facts Booklet;  we have produced a sheet which updates the figures in Tables 1, 5 and 6 of the latest edition and you can download this from the MTA web-site at http://www.mta.org.uk/industry-facts to read alongside your copy of Basic Facts.