UK Manufacturing Output, May 2014: The data published by the Office for National Statistics (ONS) this week generated some unfortunate headlines as it showed that manufacturing output fell in May, compared to April. Looking at monthly data, even when it has been seasonally adjusted, can be misleading, especially in this case, because the headline writers ignored the fact that manufacturing output had seen a spurt in March and April and the May figure could well turn out to be nothing more than a correction of this trend. It is also worth pointing out that March and April are the two months which are affected by the timing of Easter. The headlines also ignored the fact that manufacturing output was +3.7% higher than in May 2013.
Moving to our preferred measure of looking at the 3-month rolling trend, total manufacturing output in the latest 3 months (March, April and May) was +1.1% higher than in the previous 3 months (December 2013, January and February 2014) and +3.8% above the level in the same period a year ago (March, April and May 2013).
At the sub-sector level, all of the 4 main groupings are growing, with capital goods output increasing by +1.6% compared to the previous 3 months and +3.5% higher than a year earlier; of the major sub-sectors, only consumer non-durables (things like food and drink) is growing more rapidly on the sort-term comparison and only intermediate goods has a faster pace of growth on the 12-month trend.
Turning to the industry level, we start to see some small signs of weaker activity in a couple of areas. Motor Vehicles is one of the industries where the May 2014 fell compared to April, but that month had been exceptionally high and the May output figure was higher than in March; using the 3-month rolling trends, Motor Vehicle output was +7.2% higher than in the previous 3 months and +13.8% above the level of a year earlier. The industry which is causing most concern at the moment is Aerospace which has seen output fall by -1.4% on the previous 3 months and is -4.7% lower than a year ago, although it is worth pointing out that by historical standards, the level of output is still very high.
Output of the Machinery industry has fallen by -0.7% on the previous 3 months, but is still +5.0% higher than a year ago; this sector is on something of a roller-coaster ride at the moment and the shorter-term trend is affected by exceptional months for this industry in January and February 2014 and the latest figures are still above anything that we saw during 2013. The Metal Products sector is also lower than in the previous 3 months (-0.4%), but is up on year ago (+2.9%).
You can download the ONS Statistics Bulletin and the full dataset from their web-site at www.ons.gov.uk or, if you prefer, we can send either or both of these to you - please contact Geoff Noon at MTA (e-mail firstname.lastname@example.org).
Profitability of UK Companies, 1st Quarter 2014: Data from the ONS estimates the net rate of return (the ratio of operating surpluses to capital employed) for manufacturing companies was 9.3%; this is lower than the revised figure of +11.8% for the final period of 2013, but is higher than the rate of 7.7% registered for the 1st quarter of 2013. This figure is likely to be revised when then latest data on capital employed in the UK economy is incorporated into the analysis and will also be influenced by the major changes in the methodology for calculating GDP which are coming in the Autumn with the datasets for the 2nd quarter of 2014.
You can download the ONS Statistics Bulletin from their web-site at www.ons.gov.uk or request it from MTA.