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ECONOMIC DATA THIS WEEK

UK Manufacturing Output, December, 4th Quarter and 2018:  The manufacturing output data published by the Office for National Statistics (ONS) reflects the impact of a number of factors on the sector in the latter part of 2018.  In this report we will focus on the quarterly and annual data.  The overall trend for the manufacturing sector showed a fall of -1.0% for the 4th quarter, although thanks to some better figures earlier in the year, the annual total was still +0.9% higher than in 2017.  The ONS highlight this as a broadly based weakness with the largest falls in Transport Equipment (of which more later) and Basic Metals;  they also highlight a poor month in December for the Pharmaceutical industry, although this may be more about the seasonal adjustment than a real trend.

Drilling down to the sub-sector level, output of the Capital Goods industries (most of the customers for manufacturing technology suppliers are in this category) was harder hit with output falling by -3.0% compared to the previous quarter with the level at its weakest since the 2nd quarter of 2017.  With output in this sub-sector peaking at the start of the year, 2018 saw output grow by +1.4% compared to 2017.

At the industry level we normally track 4 key purchasers for our industry - Metal Products, Machinery, Automotive and Aerospace, but we will include one or two others this time.  All of our core industries ended with a negative trend for the final quarter of 2018 with reductions of -3.3%, -0.2%, -5.0% and -0.9% respectively.  One sector that bucked this trend was that for Other Transport Equipment - this is everything related to transport except motor vehicles and while it is dominated by Aerospace, it managed modest growth of +0.4% for the 4th quarter of 2018 thanks to higher output in the railway equipment sector.

Indeed, this grew strongly in 2018, thanks in large part to the ramping up of production by Hitachi in Newton Aycliffe.  As a result, this sub-sector grew by +34.0% in 2018 (over 2017) which alongside growth of +1.0% in shipbuilding, helped Other Transport Equipment as a whole to see growth of +1.9% despite the Aerospace industry output falling by -4.5%.

The Machinery industry saw output peak in the 1st quarter of 2018 and as a result, the year as a whole was positive for this industry with growth of +1.7%.  The Metal Products industry saw its peak in output at the end of 2017, but still managed a marginal improvement in 2018 with output increasing by +0.1% compared to 2017.

We reported a couple of weeks ago on the detailed output data from the Automotive industry, so it is no surprise that the ONS figures show a fall of -1.8% compared to 2017.  However, this figure would have been weaker but for an unexpectedly low figure for the 2nd quarter of 2017.

You can download the ONS Statistical Bulletin from their web-site at https://www.ons.gov.uk/releasecalendar (11 February) or request it from MTA;  we also have an analysis of the key industries which is available to members - please contact Geoff Noon (gnoon@mta.org.uk) if you would like these charts.

UK GDP, first estimate for 4th Quarter 2018:  The manufacturing (and construction and services) output data now coincides with the first quarterly estimate of GDP from the ONS.  This showed that the UK economy grew by +0.2% compared to the 3rd period of the year and that the growth rate for 2018 was +1.4% - this matches the rate we saw in 2012 and is, therefore, the joint lowest since 2009.

Returning to the quarter-on-quarter trends, the ONS notes that on the output measure both the production (manufacturing - see above - utilities and extraction) and construction sectors contracted, while the service sector grew, led by professional, scientific, administration and support services.  However, this represents an easing in the growth rate for the service sector, reflecting a slowdown across a number of industries.

In the expenditure measure of GDP, both private and government consumption grew, while gross capital formation and net trade made negative contributions to GDP growth.  Business investment decreased by -0.9% compared to the previous quarter;  this is the 4th consecutive fall in this measure.  However, this peaked at the end of 2017, having started that year relatively low, so total business investment in 2018 was still +0.8% higher than the total for 2017.  We don’t have any industry breakdown of this yet, but expenditure on “ICT equipment and other machinery & equipment” showed a fall of -2.5% in the final quarter and -1.6% for 2018 as a whole.

There are more details in the ONS Statistical Bulletin which you can download from their web-site at https://www.ons.gov.uk/releasecalendar (11 February) or request from MTA.