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ECONOMIC DATA THIS WEEK

UK Manufacturing Output, 3rd Quarter 2017:  With publication of the September figures by the Office for National Statistics (ONS) we have the data for the 3rd quarter of the year and we will focus on this rather than the monthly trend.  Total manufacturing output grew by +1.1% compared to the previous quarter and was +2.8% higher than in the 3rd quarter of 2016.

At the sub-sector level, output of the Capital Goods industries was +3.2% up on the 2nd quarter and +6.3% higher than a year ago;  this was, by a significant margin, the fastest growing of the sub-sectors of manufacturing on both comparisons.

At the industry level, the upturn in output that we anticipated in the Automotive industry after the pause earlier in the year during a period of model changes has happened, with quarter-on-quarter growth of +4.2%;  however, the influence of the earlier “weakness” is still present as the annualised growth rate is only +1.5%.  In contrast, we may be seeing a slowdown in the pace of growth in the Aerospace industry where output was only +1.1% higher than in the 2nd quarter, but was +11.0% higher than a year earlier.

Machinery industry saw a dip in activity in the 2nd quarter of 2017, but growth has resumed with an increase of +3.0% in the 3rd period of the year, taking the level +6.9% higher than 12 months ago.  However, we have yet to see a similar improvement in the Metal Products industry where output was only up by +0.3% on the previous quarter and was -1.3% lower than in the 3rd quarter of 2016.

For comparison with the European data below, total industrial production (manufacturing plus extraction and utilities) grew by +0.7% in September (compared to August) and was +2.5% higher than 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 (this includes the re-basing) - please contact Geoff Noon (gnoon@mta.org.uk) if you would like these charts.

Bank of England’s Agents’ Summary of Business, November 2017:  The latest update from the Bank’s Agents showed that manufacturing output growth had risen again, with export supply chains supported by the weakness of Sterling and some evidence of increased domestic sourcing.  However, construction activity fell and service turnover growth is only “moderate”.  The report also described capacity utilisation as being slightly above “normal” in both manufacturing and services.

This summary also included feedback from a consultation on investment intentions.  This looked back over the past 12 months and forward, both to 2018 and over the following two years.  Overall, respondents expected little change in capital spending in the coming 12 months compared to the past 12 months, but investment growth was expected to be weaker over the following two years.  The Bank’s report does not give any detail for manufacturing, but it does report that while the biggest drag on investment plans is economic uncertainty, concerns about trading relationships after Brexit and other issues such as the availability of overseas labour are also important.

You can download the Bank of England’s Agents’ summary from their web-site at www.bankofengland.co.uk/publications/Documents/agentssummary/2017/nov.pdf or request it from MTA.

European Industrial Production, September 2017:  Eurostat focuses on monthly data in their news release.  In the Euro-zone, total industrial production (seasonally adjusted) was -0.6% lower than in August, but is +3.3% higher than a year earlier (September 2016);  for the EU28 as a whole, the equivalent trends are -0.5% and +3.6% respectively.

Within the total, output of the Capital Goods sub-sector in the Euro-zone fell by -1.6% compared to August and the EU28 saw a drop of -1.4%;  compared to September 2016, output of this sub-sector increased by +4.5% in the Euro-zone and by +4.9% in the EU28.

Using the 12-month comparison, of the 24 Member States for whom the data is published, total industrial production increased in 23 and declined in only 1 - Ireland (-3.1%);  the greatest increases were in Latvia (+12.9%) and Slovenia (+8.6).

You can access the Eurostat News Release via their web-site at www.ec.europa.eu/eurostat/news/news-releases or request it from MTA.

European GDP, 3rd Quarter 2017:  The flash estimate from Eurostat confirms the earlier figure of growth of +0.6% for both the Euro-zone and the EU28;  compared to a year earlier, GDP for both areas was up by +2.5%.  Although the quarter-on-quarter rate is slightly slower than in the previous period, the annualised rate has accelerated, from +2.3% for the Euro-zone and from +2.4% for the EU28 (again, these rates are unchanged from the preliminary figures we reported on a couple of weeks ago).

This is the first release with data on individual countries, although not all of the EU Member States have released figures for the 3rd quarter yet.  Among those which have, only Denmark had a quarter-on-quarter fall in GDP (-0.3%), although, both Spain and France both saw a slightly slower pace of growth, while it accelerated in Germany, Italy and Poland.

Looking at the annualised growth rates, most of the economies and all of the major ones other than the UK, saw an acceleration of the annualised growth rate.  In particular, German economic growth quickened to +2.8% in the year to the 3rd quarter of 2017.

You can access the Eurostat News Release via their web-site at www.ec.europa.eu/eurostat/news/news-releases or request it from MTA.

UK Productivity, 3rd Quarter 2017:  In parallel with the unemployment (and employment) data, the ONS published its flash estimate of UK productivity for the 3rd quarter of 2017.  It showed output per hour, the main measure of labour productivity, for the whole economy increased by +0.9%.  Welcome as this is following two quarters where productivity declined, there is still a long way to go before the “productivity conundrum” (broadly flat productivity since the recession because of the relative strength of employment vis-à-vis GDP) is resolved.

The increase in output per hour came as a result of an increase in gross value added coupled with a fall in total hours worked, with the latter driven mainly by a fall in average hours per worker rather than fewer people being employed.

At this stage, there are no estimates of hours worked, and therefore productivity, at an industry level, so we only have this whole economy level data at the moment - we get these breakdowns at the start of the new year.  However, the ONS notes that manufacturing output increased by +1.3% in the 3rd quarter (see above), so unless there is a similar increase in hours worked, manufacturing productivity is likely to have increased.

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

UK Trade, 3rd Quarter 2017:  As with the output data, publication of the September figures by the ONS gives us the quarterly data for the UK’s trade in goods.  Compared to the 2nd quarter, the UK’s trade deficit in goods widened by £4 billion, with imports rising and exports falling between the two periods.  Imports of goods reached a new record level of £121.4 billion, while exports were worth £85.6 billion.

The fall of goods exports in the quarter was entirely due to trade outside of the EU which saw a decline of -£1.7 billion (mainly fuel and chemicals) which off-set an increase in exports to the EU of +£0.7 billion - the latter was mainly cars and reflects the improvement in output in this industry after the model changes earlier in the year.

The rise in imports was more evenly split, with an increase of +£1.7 billion in arrivals from the EU and +£1.5 billion from the rest of the world.  For the non-EU countries this was mainly in unspecified goods (which includes non-monetary gold) and fuel, while for the EU countries the increase was led by mechanical and electrical machinery, material manufactures and fuel.

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