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ECONOMIC DATA THIS WEEK

UK Manufacturing Output, November 2017:  The very positive data from the Office for National Statistics (ONS) propelled a good news story about manufacturing to the top of the BBC evening news programme on Wednesday.  Total manufacturing output in the latest 3-month period (September, October and November 2017) was +1.5% higher than in the previous 3 months (June, July and August 2017) and +3.9% above the level of a year earlier (September, October and November 2016).

The growth in manufacturing output was broadly based, but the Capital Goods sub-sector is by far the strongest at the moment with growth over the past 3 months of +2.5%, taking output to +8.2% higher than it was in the same period a year ago.

Not only that, but the largest contribution to growth in the latest data came from the Machinery industry where output in the latest 3 months was +5.5% higher than in the previous 3 months and +9.7% higher than a year earlier.  The ONS quotes evidence collected from some of the larger businesses in this industry as suggesting that the increased turnover was due to work carried out on large-scale projects, including renewable energy.

Although the pace of growth has slowed a little in the Aerospace industry, output was still +1.0% higher than in the previous 3 months and +6.3% up on a year earlier.  Indeed, November set a new record level of output for this industry.

For the Automotive industry, which had a very strong October (at least on the seasonally adjusted data), November saw quite a sharp dip, although it remains to be seen if this is driven by the seasonal adjustment.  Despite this, and partly because the model change affected month of June remains in the comparison this month, Automotive output was still +2.3% up on the previous 3 months, although only +2.5% higher than a year earlier.

Finally, at the industry level, even the Metal Products industry seems to be sharing in the good news with output +2.5% up on the previous 3 months and +4.2% higher than the same period in 2016.  Although still some way short of its peak (in July 2007), the past couple of months have seen output of this industry at its highest since October 2008.

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.

European Industrial Production, November 2017:  There is a similar pattern in the European figures released by Eurostat which shows total industrial production in the Euro-zone was +1.0% higher than in October 2017 and +3.2% up on a year earlier (November 2016).  For the EU28, total output increased by +0.9% and +3.5% respectively.

As in the UK, it is the Capital Goods sub-sector that is leading the way with output in the Euro-zone increasing by +3.0% compared to October and +6.2% over a year ago, while for the EU28, it has grown by +2.4% and +6.8% respectively.  In part, this strength arises from an unwinding of some odd data for Germany in October (which was related to the adjustment for the number of working days), but it is generally wide-spread across the region.

Using the 12-month comparison, of the 22 Member States for whom the data is published, total industrial production increased in 18 and declined in 4;  the largest increases were in Slovenia (+9.9%) and Romania (+9.3%), while Ireland had the largest fall (-10.1%).

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.

Profitability of UK Companies, 3rd Quarter 2017:  This data series from the ONS is notorious for large revisions and the latest release is no exception with some downward revisions to earlier figures, although the overall trend remains strong.

The net rate of return for UK manufacturing companies fell to 13.4% in the 3rd quarter of 2017;  this is down from the peak level of 15.8% which was recorded in the 2nd period of 2017, but is up on the 11.7% that we saw a year earlier.  The strength of the current data is emphasised by the fact that the Q3-17 level is the 5th highest recorded this century and two of the 4 higher data points were in the 1st and 2nd quarters of 2017.

The net rate of return is calculated as the economic gain (profit) as a percentage share of capital used in production.  The term “net” refers to the rate of return after accounting for the current value of capital consumed and capital stocks.

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

European Commission Economic Sentiment Indicator, December 2017:  The European Commission (EC) takes a range of industry surveys from across the continent, including the CBI Industrial Trends Survey in the UK, to calculate its Economic Sentiment Index (ESI) for both the Euro-zone and the EU28.  The latest reading showed another significant increase with the ESI reaching its highest levels since 2000 for both regions.

Industrial confidence, one of the elements of the overall ESI, continues on the upward path that began last Autumn.  The Euro-zone figure was driven higher by managers’ higher expectations for production, supported by improved appraisals of the current level of order books and stocks of finished products.  Outside the calculation, there was also a marked improvement in past production (supported by the data published by Eurostat which we have already covered), while their views on export order books remained broadly unchanged.  There is a similar pattern for the EU28.

You can download the EC ESI 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 request it from MTA.