Skip to main content

ECONOMIC DATA THIS WEEK

UK Manufacturing Output, 2nd Quarter 2017:  With the release of the June data by the Office for National Statistics (ONS) we get the figures for the full quarter and this note will focus on this data rather than the monthly trends.  Total manufacturing output was -0.6% lower than in the previous quarter, but was +0.2% above the level of a year earlier.  The ONS attributes the fall mainly to Transport Equipment, but as we will see later, there are reasons behind this decline and it is not, yet at least, a major cause for concern.

At the sub-sector level, output of Capital Goods fell by -0.9% compared to the 1st quarter of 2017, but was +1.2% higher than a year earlier (Q2-16).  With the exception of Consumer Goods which was flat, all of the sub-sectors saw a short-term decline in output;  looking back to a year ago, Capital Goods and Intermediate Goods both grew at the same rate, while output of Energy and Consumer Goods declined.

As we noted a couple of weeks ago, UK car output has been weak in the 2nd quarter of 2017;  SMMT puts this down, in part at least, to model changes, although given that most of the fall has been in cars destined for the home market, the weakness in demand in the UK is also a factor (and a slight concern).  However, engine production is still growing and as the new models come on stream later in the year, output should pick up again.  The ONS data shows that Automotive output fell by -5.8% compared to the previous quarter and was down by -5.0% compared to the same period in 2016.

Balancing this to some extent is the Aerospace industry which continues to set new output records with the figure for the 2nd quarter of 2017 being +2.7% higher than the previous quarter and +5.0% up on a year ago.  The Machinery industry was slightly disappointing with output falling by -1.1% compared to Q1-17, but this was still +4.1% higher than a year ago and it is worth pointing out that the 1st quarter figure was the highest since the end of 2014 and that the Q2 figure has been dragged down by a weak June that is, hopefully, a blip rather than a turning point.

For Metal Products, the news is less positive as following what looked like an improvement during 2016, this year has seen output slip back again and the 2nd quarter showed a decline of -0.5% compared to the previous period and -1.3% below a year earlier.

You can download the ONS Statistical Bulletin from their web-site at www.ons.gov.uk 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 Trade in Goods, 2nd Quarter 2017:  Data from the ONS shows that the UK’s trade deficit for goods widened very slightly, with both exports and imports rising by a similar amount.  Exports increased by +0.3% compared to the previous quarter to a new record of £84.0 million, while imports were also up by +0.3% to £118.3 million (which is also a new record), leaving a trade deficit of £34.4 million for the quarter.

The quarter-on-quarter increase in exports was mainly due to better figures for Chemicals and Mechanical Machinery, although “unspecified goods” (which is likely to be the non-monetary Gold that has affected the data recently) also made a significant contribution.  Exports to the rest of the European Union (EU) grew by +2.0% compared to the previous quarter with Chemicals and Machinery & Transport Equipment the main contributors;  at the same time, exports outside of the EU fell by -1.4% with Fuels and Machinery & Transport Equipment the main drivers of this, off-set partly by an increase in exports of “unspecified items”.

We don’t have the same detail for imports, but the data does show that arrivals of goods into the UK from the EU and imports from outside the region both grew by +0.3% compared to the previous quarter.

In the 2nd quarter of 2017, exports of goods to the EU accounted for just under 49% of all goods exports - up nearly one percentage point on the 1st period of the year - while the ratio for imports was almost 55% (the same as in Q1).

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

Bank of England  Agents’ Summary of Business Conditions, August 2017 Update:  The latest update reflects a further growth in manufacturing output that is, perhaps slightly at odds with the ONS data, although the timing is slightly different.  The Bank’s Agents’ put this down to an increase in activity in export supply chains and some pick up in import substitution, although they also note that demand from the oil & gas sector has edged up.

Investment intentions remained modestly positive overall with the level for the manufacturing sector around its highest level for over 2 years.  The Agents noted that some exporters were investing to expand capacity, although uncertainty continues to hold back on some firms’ longer-term plans.  Capacity utilisation rates for manufacturing had increased marginally and remain slightly higher than “normal”.

You can download the Bank of England’s Agents’ Summary from their web-site at http://www.bankofengland.co.uk/publications/Pages/agentssummary/default.aspx or request it from MTA.