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ECONOMIC DATA THIS WEEK

UK Manufacturing Output, 4th Quarter 2017:  Publication of the December data by the Office for National Statistics (ONS) of course means that we get both the 4th quarter and full year trends for the UK manufacturing sector and its industries.  The headline figure shows manufacturing output increased by +1.2% in the 4th quarter and by +2.9% for the year as a whole.  In 2017, UK manufacturing output was at its highest level since 2007.

However, as has been the case for some time, the detailed figures are even better for key engineering industries.  Overall, capital goods output increased by +2.0% in the 4th quarter and by +6.6% for the 2017 with both the quarterly and annual figures at their highest levels since this data series began in 1997.

Looking at the 4 key industries that we track, most of them ended the year in good health.  The aerospace industry continues to set new records for output, with activity growing by +3.0% in the 4th quarter and by +8.0% for 2017.  We are, at last, seeing a sustained improvement in the Machinery industry where growth was +4.0% and +7.7% respectively - the level of activity in the final quarter of 2017 was its strongest since the 3rd quarter of 2014.

On a quarterly basis, the “star performer” at the end of 2017 was the Metal Products industry where output was strong in all 3 months, but especially December (the latter may turn out to be a quirk of seasonal adjustment), although this is helped partly by the fact that it has been weak for some time.  In the 4th quarter output increased by +5.8% compared to the 3rd period of the year, but full year growth was only +1.9%, reflecting the flat picture we saw for most of the year.

The weak point was the automotive industry - we will write more about this next week with an article on the detailed numbers, but output in this industry fell by -1.7% in the 4th quarter of 2017 with both November and December numbers being relatively weak.  However, for 2017, output grew by +0.2% which shows that although there has been some weakness (in part because of model changes during the year) output levels in this industry remain at a high level.

In conclusion, it is worth noting that some commentators will reflect on the data for total industrial production; while manufacturing dominates this measure, it also includes utilities and extraction industries and the latter has been hit hard by the shut-down of the Forties oil-field because of crack in the supply pipe in December.  Despite this, total industrial production still managed to grow by +0.5% in the 4th quarter and by +2.2% for 2017 as a whole.

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 Commission Economic Sentiment Indicator, January 2018:  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 (for January) fell back slightly from its 17-year record high seen in November for both the Euro-zone and the EU28.

One of the elements of the ESI is industrial confidence and this was broadly flat for both the Euro-zone and the EU28 which is promising in the context of the small overall reduction in the ESI.  This was driven by a combination of managers more optimistic views of the current level of orders books, a worsening assessment of stocks of finished goods and unchanged expectations about production in the coming 3 months.  Although not included in the assessment of confidence, managers’ views of production in the past 3 months fell significantly - we will need to wait a few weeks to see if this is reflected in the actual output data and to see which industries drove the trend - but export order books improved slightly.

This is one of the quarterly surveys where we get data on capacity utilisation;  this improved to its highest level since the start of 2008 for both the Euro-zone and the EU28.  All of the major industrial economies on the continent saw a significant improvement in their capacity measure, reaching their highest levels since 2008 in Germany, Spain and France and the highest since 2007 for Italy.  However, the UK saw a sharp fall in capacity utilisation to 81.4%, but it is worth noting that it has been strong through the first 3 quarters of 2017 and, in part, this looks to be a correction;  the overall level remains above the long-run average.

You can download the EC ESI report from their web-site at https://ec.europa.eu/info/business-economy-euro/indicators-statistics/ec... or request it from MTA.