Skip to main content

ECONOMIC DATA THIS WEEK

UK Manufacturing Output, October 2018:  The Office for National Statistics (ONS) published some fairly gloomy data for manufacturing output this week, although as always, it is important to read beyond the headlines.  In this summary, we have focused on the 3-month rolling trend that compares the latest 3 months (August, September and October 2018) with the previous 3 months (May, June and July 2018) and with the same period a year earlier (August, September and October 2017).

Total manufacturing output was unchanged compared to the previous 3 months (at the 1 decimal point level) thanks to a weak October which took the total back to the May level;  looking back to the same period a year earlier, there was growth of +0.3%.  The Capital (or Investment) Goods sub-sector did slightly better with growth of +0.3% compared to the previous 3 months and +0.8% up over a year earlier.

However, it is at the industry level that we see both good and bad news stories.  Unusually, the current “star” is the Metal Products industry where output increased by +2.2% compared to the previous 3 months, although this was still -0.1% lower than a year earlier, thanks to a burst of activity which ran from October to December 2017.

The Aerospace industry also provided some good news, although the falls in output of -0.1% and -4.1% respectively for our two comparisons does not make this obvious.  Since the ONS revised the data history a couple of months ago, we have seen some strange trends in this industry with a slow but steady fall in output from a peak in May 2017.  However, there has been a reversal of this trend in September and October which, if it continues, should start to generate some positive trends through 2019.

The Machinery industry saw output fall by -1.5% compared to the previous 3 months , with a reduction of -0.5% over the level of a year earlier.  However, this too may be hiding some better news as we appear to have seen an end to the cycle which saw strong growth in output in the 2nd half of 2017 to twin peaks in January and March 2018, before a fall (or correction?) to July;  since then, the output level has been broadly flat.

The weakest sector was the Automotive industry where output fell sharply in October, although thanks to some better figures in the two previous months, the 3-month rolling trend still showed an increase of +0.5% compared to the previous period - however, activity fell by -3.5% compared to a year ago.  Data from SMMT shows that car output fell again in October, taking the year to date trend down to -6.9% (compared in this case to January to October 2017);  the home market, although relatively small proportion of the total, is the weakest, but there has also been a fall in exports which now account for over 81% of car output in the UK.  There is modest growth in commercial vehicle output, although the numbers are small, but there is better news in the growth of engine output of +2.6% for the first 10 months of 2018.  Inevitably with the fall in UK car output, the home market for engines is falling, but growth continues in exports which account for 61.5% of engine output for the January to October 2018 period.

You can download the ONS Statistical Bulletin from their web-site at https://www.ons.gov.uk/releasecalendar (10 December) 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.

European Industrial Production, October 2018:  The equivalent data from Eurostat (who track industrial production rather than manufacturing output and from which it is hard to get the 3-month rolling trend), shows a reduction of -0.6% compared to September for the Euro-zone, while the EU28 saw a decline of -0.4%.  However, compared to October 2017, total industrial output grew by +1.2% in the Euro-zone and by +1.3% in the EU28.

At the sub-sector level, output of Capital Goods in the Euro-zone increased by +1.0% compared to September 2018 and by +3.7% over October 2017;  for the EU28, the growth rates were +0.8% and +3.3% respectively.  This sub-sector was, therefore, the best performing section of industry on all 4 comparisons.

Still focusing on the 12-month growth rates, of the 24 Member States for whom the figures have been published, total industrial production increased in 18 and fell in 6.  The strongest growth was in Lithuania (+9.2%) and Ireland (+6.1%), while the largest decreases were in Croatia (-2.4%) and Latvia (-1.9%).

You can download the Eurostat News Release from their web-site at www. http://ec.europa.eu/eurostat (12 December) or request it from MTA.

UK GDP, monthly estimate for October 2018:  Although the ONS now produces monthly GDP data, it still tends to focus on 3-month rolling trends, mainly to eliminate the noise of the monthly data.  Therefore, with GDP in October rising by +0.1%, the rolling 3-month trend (see our earlier piece for these periods) shows growth of +0.4% over this period.

This represents a slowing of the pace recorded in the 3 months to September;  inevitably given its dominance of the UK economy, this was driven mainly by the service sector where a fall in car sales led the softening, balanced to some extent by growth in the IT and accountancy industries.  The ONS notes that manufacturing did not grow at all in the last 3 months and they attribute this to “the often erratic pharmaceutical industry”.  Activity in the construction sector was also positive in this period, but this was wholly in a strong September which outweighed modest falls in both August and 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 (10 December) or request from MTA.European GDP and Productivity, 3rd Quarter 2018:  Eurostat has published an update of its estimates for GDP which now show growth in the Euro-zone of +0.2% compared to the previous quarter which takes the annualised rate to +1.6%. For the EU28, the quarterly growth rate was +0.3% and the annualised rate +1.8%.

The annualised rates represent a slowing in the pace of growth for both regions - in the 2nd period of 2018, the “annual” GDP growth rates were +2.2% for the Euro-zone and +2.1% for the EU28.

This release also includes employment data which enables Eurostat to calculate productivity levels.  They note that this has hovered around +1% for the annualised rate in both the Euro-zone and the EU28 since 2013;  the latest data shows a significant fall in productivity in the Euro-zone - this was driven by the GDP side of the equation as this slowed more rapidly here than in the EU28 as a whole.

Returning to the GDP data itself, the country breakdown shows that Germany, Italy, Lithuania and Sweden all saw a contraction of their economies compared to the 2nd quarter of 2018, although the annualised rate remains positive in all 26 of the Member States for whom it is published.  However, the German economy slowed to an annualised rate of just +1.2% (it had been +2.8% at the end of 2017) and with growth in Italy and France also slowing (to +0.7% and +1.4% respectively for the 3rd quarter of 2018), it is clear that the weakness in the Euro-zone is being driven by the larger economies.

You can download the Eurostat News Release from their web-site at www. http://ec.europa.eu/eurostat (12 December) or request it from MTA.

Investment Grants in Scotland:  The Scottish Government still uses a grant based system for supporting investment - Regional Selective Assistance (RSA);  details of this scheme are available at http://www.scottish-enterprise.com/services/attract-investment/regional-selective-assistance/overview.  They produce a report that includes accepted offers and payments made;  the latest edition covers the 2nd quarter of 2018 and can be downloaded at https://www.scottish-enterprise.com/our-organisation/accessing-our-information or is available on request from MTA (we can also add you to a mailing list to receive these reports as they become available).