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ECONOMIC DATA THIS WEEK

UK Manufacturing Output, November 2019:  When the Office for National Statistics (ONS) published the manufacturing output figures at the start of the week, the headline showed a reduction of -0.8% for the latest three months (September, October and November 2019) compared to the previous 3 months (June, July and August 2019), with a decrease of -1.2% when compared to the same period a year ago (September, October and November 2018).

In the rest of this report, unless specified otherwise, we will quote to percentage changes;  these are for the latest 3 months compared to the previous 3 months and the same period in 2018 respectively.  For the Capital Goods industries these trends were -0.5% and -2.0% respectively, with November having been a particularly weak month.

At this point it is worth mentioning that the output data has been revised back to the start of 2018.  As a result, the Machinery industry is now estimated to have grown by +2.9% in that year whereas pre-revision, the growth rate was +2.2%.  The other significant change is the Automotive industry which has moved the other way - output is now estimated to have fallen by -1.7%, much more than the -1.1% before the revision took place.  The ONS has also produced a paper explaining the differences between their output data for the Automotive industry (which is based on values for companies classified to the industry) and the data from SMMT on the production of cars, engines and commercial vehicles (this is a unit number count).

Returning to the latest data, it is the automotive industry which is one of the weakest;  as a result of poor November, output in the latest 3 months fell by -2.4% compared to the previous 3 months and was -3.1% lower than a year ago.  Although they are measured on a different basis, this weakness in November is reflected in the data from SMMT.  The number of cars manufactured was -20.0% lower than in October 2019 and -16.5% down on November 2018;  the equivalent trends for engines were -16.4% and -13.9%.  Although not a public as the shutdowns in April, there is some evidence that this may, at least in part, be due to planned down-time in anticipation of Brexit occurring on 31st October without a formal withdrawal agreement.

The other weak industry in the latest data is Machinery;  this saw output fall by -1.0% on the previous 3 months and, partly as a result of the upwardly revised data for 2018, by -4.5% compared to the same months a year earlier.  Output of the Metal Products industry was unchanged compared to June to August and up by +2.3% on a year earlier, while the Aerospace industry showed trends of +0.3% and -2.0% respectively.

You can download the ONS Statistical Bulletin from their web-site at https://www.ons.gov.uk/releasecalendar (13 January) 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.  The ONS comparison between their output data and that from SMMT is also available at this link (published on 10 January).

UK GDP, monthly estimate for November 2019:  The latest estimate of GDP from the ONS showed growth of just +0.1% in the 3 months to November which is slower than in either of the two previous months.  They note that growth in the construction sector was pulled back by weakness in services and, as we have already noted, a decline in manufacturing activity.

The monthly series has been volatile during the year but this masks a long-term weakening in the rolling 3-month growth trend.  This can be seen in the comparison of the latest 3 month period with the same months a year earlier.  In the latest data, this growth rate is at its slowest for some time.

Although monthly data can be distorted by one off events - including for example, the pre-Brexit stock-building that we saw in both March and October - the ONS report that the economy contracted by -0.3% in November.  Both services and manufacturing contracted - the latter following the Brexit stock-building gave a positive figure for October - while the construction sector bounced back from a fall in October.

There are more details in the ONS Statistical Bulletin which you can download from their web-site at https://www.ons.gov.uk/releasecalendar (13 January) or request from MTA.

European Industrial Production, November 2019:  Timing of data releases means that we also have the European data on industrial output from Eurostat.  This shows that total industrial production (mostly manufacturing, but also including extraction and utilities activity) in the Euro-zone increased by +0.1% compared to October;  however, mainly as a result of the UK figures, the EU28 saw a month-on-month decrease of -0.1%.  Compared to November 2018, Euro-zone total output fell by -1.5%, with a decline of -1.3% for the EU28.

In the Euro-zone, the month-on-month growth was led by the Capital Goods sub-sector which grew by +1.2%, although compared to a year earlier, output fell by -2.0%.  For the EU28 as a whole, output of the Capital Goods industries was +0.6% higher than in October 2019 but fell by -2.1% compared to November 2018.

Looking back over 12 months, of the 25 Member States that have published their November figures, only 10 saw an increase in total industrial production while 15 registered a decrease.  The fastest growth was in Hungary (+5.7%) and Poland (+5.6%), while the largest reductions were in Greece (-8.3%), Romania (-7.5%) and Estonia (-7.2%).

The Eurostat News Release can be downloaded from their web-site at www. http://ec.europa.eu/eurostat (15 January) or requested from MTA.

European Investment and Profitability, 3rd Quarter 2019:  Eurostat has also published data on investment that shows a fall in the business investment rate from 25.5% in the 2nd quarter to 23.7% in the 3rd period of the year.  However, that 2nd quarter figure was an outlier (for reasons that are not explained) so it is more valid to compare with the 23.6% recorded in the 1st quarter of 2019 or the 23.4% a year ago (Q3-18).

The profit share for non-financial corporations was unchanged from the previous quarter at 39.2%.  This is, therefore, the joint lowest rate since the 2nd quarter of 2014.

The business investment rate is defined as gross fixed capital formation divided by gross value added for the whole economy, excluding financial corporations.  The profit share of non-financial companies is the gross operating surplus divided by gross value added.  This data is only published for the Euro-zone.

The Eurostat News Release can be downloaded from their web-site at www. http://ec.europa.eu/eurostat (14 January) or requested from MTA.

European Commission Economic Sentiment Indicator, December 2019:  The European Commission’s (EC) use a variety of business surveys to derive its Economic Sentiment Index (ESI).  Compared to November, this edged up in the Euro-zone and was unchanged for the EU28.

The ESI is based on a combination of confidence indicators for 5 sectors of the economy.  Industry confidence in the Euro-zone was virtually stable in December with the survey respondents increased optimism about production level sin the coming 3 months balanced by weaker appraisals of both stocks of finished products and the current level of order books.  Although not included in the calculation of confidence, the assessment of both export order books and the level of production over the previous 3 months both worsened as well.

Industry confidence weakened in the EU28, but the report does not give any more details.

In the other parts of the economy, confidence was higher than in November for the services and construction sectors, improved but to a lesser extent for the retail trade and weakened amongst consumers.  Finally, although not included in the calculation of the ESI, confidence in the financial services sector improved.

You can download the EC report from their web-site at https://ec.europa.eu/info/business-economy-euro/indicators-statistics/economic-databases/business-and-consumer-surveys/download-business-and-consumer-survey-data/press-releases_en or you can request it from MTA.