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ECONOMIC DATA THIS WEEK

UK Manufacturing Output, January 2019:  The Office for National Statistics (ONS) showed total manufacturing output grew by +0.8% in January, but our preferred measure using the 3-month rolling trend has output in the latest period (November and December 2018 and January 2019) falling by -0.6% compared to the previous period (August, September and October 2018) and by -1.5% compared to a year earlier (November and December 2017 and January 2018).

The Capital Goods sub-sector has the same trends, but with larger magnitudes;  compared to the previous 3 months, output fell by -1.5% with a reduction of -3.8% against the same period 12 month earlier.  This makes it the worst of the sub-sectors of manufacturing on both measures, with intermediate goods output also falling, but by less and the consumer goods sub-sector seeing an increase in output.

Regular readers will be aware that we track 4 key industries which, taken together, account for a large majority of MTA members customers;  all of these industries repeated the trend of output falling in the latest 3 month period compared to both the previous 3 months and the same period a year earlier.  Probably the best performer was the Aerospace industry where output only fell by -0.6% compared to the previous 3 months, but it was still -5.9% down on a year earlier;  however, this does not really seem to tie up with our general view of the industry and something strange seems to be happening with the data.

We have seen Automotive output falling steadily, although not rapidly for a while now and with January 2019 looking to be a particularly weak month (although this may be more about the seasonal adjustment than actual activity), the output trends for this industry were -4.1% and -5.3% respectively.  The SMMT data on the industry, tracking production of cars, commercial vehicles and engines showed significant falls in January 2019 compared to 2018, with the exception of the middle of these where output was up by nearly +50%, although on a relatively small number compared to the other two products.

The Metal Products industry was the only one of the four where output increased in January, but only slightly and the significant fall we saw in November has not been reversed so output across the latest 3 months was -4.6% lower than in the previous 3 months and -8.1% down on a year earlier.  The Machinery industry seems to have resumed a slow but steady decline with output falling by -0.9% and -7.6% respectively.

You can download the ONS Statistical Bulletin from their web-site at https://www.ons.gov.uk/releasecalendar (12 March) 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.

European Industrial Production, January 2019:  The data from Eurostat makes slightly better reading overall, although the detail suggests that this is not helpful to our sector.  Following the sharp falls in output in November and December, total industrial production in the Euro-zone increased by +1.4% compared to December 2018, but this still left it -1.1% below the level of a year earlier (January 2018).  For the EU28 as a whole, the trends were +1.0% and -0.4% respectively.

The continuing concern in the data comes from the fact that the Capital Goods sub-sector was among the weakest elements of industrial production.  In the Euro-zone, Capital Goods output increased by +0.9% compared to December 2018 but compared to January 2018 it fell by -3.0%;  for the EU28, the respective trends were +0.9% and -2.4%.  In both cases, the month-on-month trend was the 2nd weakest of the sub-sectors ahead only of Intermediate Goods and on the longer term comparison, Capital Goods was the weakest of the sub-sectors.

Looking back to January 2018, of the 24 Member States for whom the figures have been published, total industrial production grew in 16 and fell in 8.  The largest reductions were in Ireland (-6.2%), Luxembourg (-4.2%) and, perhaps most worryingly, Germany (-3.4%), with Italy and the UK also in negative territory;  the fastest growth rates were in Slovakia (+7.2%), Poland (+6.1%) and Lithuania (+5.9%).

You can download the Eurostat News Release from their web-site at www. http://ec.europa.eu/eurostat (13 March) or request it from MTA.

UK GDP, monthly estimate for January 2019:  Alongside the manufacturing output data, we now get the ONS monthly GDP estimate;  this showed that UK GDP grew by +0.5% in January (compared to December 2018) but only by +0.2% in the latest 3 months (compared to the previous 3-month period).  The latter is the same rate as in the last quarter of 2018.

The Head of GDP at the ONS commented that growth remains weak, with falls in the manufacture of metal products and cars, along with construction repair work, dampening economic growth, off-set by strong performances in wholesale, IT and health services.

The only sector to make a positive contribution to growth in the 3 months to January was Services which grew by +0.5% over this period.  The Manufacturing (-0.7%) and Construction (-0.6%) sectors contracted and so made a negative contribution to GDP growth.  The Construction sector shows sharp variations with a monthly reduction of -2.8% in December followed by growth of +2.8% in January;  however, this does not appear to be a correction as the fall in December came in private new housing work, while the improvement in January was in non-housing repairs.

There are more details in the ONS Statistical Bulletin which you can download from their web-site at https://www.ons.gov.uk/releasecalendar (12 March) or request from MTA.

USMTO and US CTMR, January 2019:  The US Manufacturing Technology Orders (USMTO) programme tracks orders in the US market, based on the reports from participants.  Although the total for January was down on December 2018, it was +4.8% higher than the start of 2018, making it the second best January in the 22-year history of the survey.  The rolling 12-month trend (the total for the past 12 months compared to the previous 12-month rolling total) is up by +16.0%.

For confidentiality reasons, not all of the regional totals are published, but the results for metal cutting machines (which is by far the largest part of the market covered by the USMTO) are available.  Four of the six regions grew compared to January 2018, led by an expansion of +49% in the South-East area;  the two regions that were lower than a year earlier were South-Central (-32%) and West (-3%).

The US Cutting Tool Market Report (CTMR) is similar in concept, although it tracks sales rather than orders.  The total for January was +10.1% higher than in December 2018 - not surprisingly given that the tooling market is affected by the holiday season - but more importantly it was +13.4% higher than in January 2018;  the 12-month rolling trend grew by +13.1%, a small acceleration compared to the past few months.  There is no regional breakdown in this report.

You can download the press release for the USMTO from the AMT web-site at www.amtonline.org, with the CTMR release published on the USCTI web-site at www.uscti.com;  alternatively, you can request either or both releases from MTA and we can make sure you get them when they are published each month.