CBI Industrial Trends Survey, May 2022: The latest results from the CBI Industrial Trends Survey (ITS) show an improvement in both output and orders growth in May – note that the data collection ran from 26th April to 12th May so this really refers to April (or the month before the date of the survey for earlier editions) and the three month period from February to April.
The question about order books asks if these are above, at or below “normal” and the percentage balance in the “May” survey picked up from that registered the month before and matched the record high seen in “March”. This boost seems to have come mainly from export demand which had the strongest positive balance (i.e. net above normal) since January 2018.
There was also an acceleration in the rate of growth in output to its highest level since the three months to July 2021. Output picked up in 13 of the 17 sub-sectors, led by the food & drink group, with chemicals and mechanical engineering (machinery) also improving significantly. There was also an improvement in expectations for output in the coming three months although not back to the peak levels from earlier in the year.
Exceptionally, the CBI also re-asked a couple of questions from the extended quarterly surveys; one of these was around investment intentions (the change in spending over the coming 12 months compared to the previous period) which showed an easing from +9 to +2.
You can get the Press Release of the CBI ITS from their web-site at www.cbi.org.uk/media-centre (19 May) or request it from MTA (we can also provide a summary of the results).
Flash Purchasing Managers Index, May 2022: The flash manufacturing sector Purchasing Managers’ Index (PMI) for the UK fell to 54.6 (from 55.8 in April) – this is a 16-month low but it still suggests an expansion of activity in the sector, albeit at a slower pace. However, the detail reveals that this was largely driven by a fall in output where the series index fell to 51.8 driven mainly by supply chain disruption, the war in Ukraine and rising inflation.
There was a modest increase in total new orders but, for manufacturers, export orders fell at their fastest pace since June 2020 with Brexit-related trade frictions getting the bulk of the blame. The overall index would have been worse were it not for the perverse impact of an increase in suppliers delivery times which worsened again in May. This is seen as a sign of high demand, so is taken as a positive when calculating the PMI when, in fact, it should be a negative in the current circumstances.
There was a similar trend in the Euro-zone with the overall manufacturing PMI falling to 54.4 (from 55.5 in April) – in this case it is an 18-month low. However, there are differences at a detail level, perhaps most notably in that the output element of the Euro-zone manufacturing PMI increased modestly in the latest reading, although it is still a rather lackluster pace of growth.
Output in the Euro-zone is also being constrained by continued supply chain problems although the length of suppliers delivery times did ease a little compared to March and April and this, in turn, helped the automotive industry to improve output. Other sectors, however, reported weaker demand from more cautious customers and household spending being diverted from goods to services which led to the pace of output growth slowing or even turning negative. The other factor in the Euro-zone is that new orders turned negative for the first time since June 2020.
We have separate reports for Germany and France; the former saw a turnround in output which had been negative in April but which registered a modest positive reading for May (this probably reflects the improved situation for the automotive industry) and generated an improvement in the overall manufacturing PMI. However, Germany saw new orders falling , with export orders especially weak. For France, the manufacturing PMI fell to a 7-month low, with the output element easing although still positive. While orders were not great, they were, unlike Germany, still growing and suppliers delivery times, while still lengthening, did so at the slowest pace since January 2021 – as noted elsewhere, this had a negative impact on the overall PMI level.
The only other flash PMI readings are in Japan and the USA and both countries saw a fall in their manufacturing PMI reading, slightly so for Japan but more robustly in the USA. Both countries saw the output element of the calculation lower than in April, but still above the crucial 50 level. Similarly, for orders, both countries saw orders increasing at their slowest rate for 3 months, although they were faster in the USA, with Japan seeing only marginal growth. Japanese manufacturers reported suppliers delivery times lengthening at their fastest pace since the earthquake and tsunami in April 2011 (their closer links to China with its renewed Covid-lockdowns is probably the reason for this) while in the USA the PMI was also supported by longer delivery times but not to the extent seen in Japan.
These reports are available on the “PMI by S&P Global” web-site at https://www.markiteconomics.com/Public/Release/PressReleases?language=en or on request from MTA.
UK Investment by Industry, 1st Quarter 2022: The Office for National Statistics (ONS) has now published the breakdown of the investment data that was published a couple of weeks ago. In the context of a seasonally adjusted fall in total business investment of -0.5% compared to the final period of 2021, manufacturing investment fell by -1.3% but spending by the engineering & vehicles (E&V) grew by +1.7%. This ties in with the growth of +5.5% in spending on “ICT & other machinery” when broken down by asset type.
If we compare the rolling 4-quarter totals we get a slightly different picture; total business investment in the 4 quarters up to and including Q1-2022 (the “latest” period) was +6.9% higher than in the previous 4 quarters (Q2-20 to Q1-21) but manufacturing investment increased by +10.9%. This is effectively comparing Covid times (although this was only really the first three of the four quarters in the “previous” period) with the immediate recovery.
On the same basis, E&V investment was only up by +6.3% but in the asset breakdown, spending on ICT & other machinery grew by +15.6%; it is a pity that this very broad category is not broken-down any further as it seems inevitable that this growth will mainly have reflected ICT spending in reaction to the increase in home working during the pandemic, although this category did also see a fall in Q2-2020 as the Covid outbreak began.
This data is only published by the ONS as a spread-sheet and not a bulletin with commentary; this is available at their website at https://www.ons.gov.uk/releasecalendar (20 May) or we can send you our analysis of the data which highlights the most important series that we have highlighted in this report – if you want this, please contact Geoff Noon at MTA (email: Geoff.noon@mta/org/uk).
UK Trade in Goods, 1st Quarter 2022: Data on trade in goods from the ONS for this period is complicated by two issues. Collection of data on trade with the European Union has moved from the VAT-based Intrastat system to the use of customs declarations which, the ONS suggests, may have had a greater impact on the recording of UK imports from the EU rather than our exports. The other issue is that trade in precious metals in general and non-monetary gold in particular can be very volatile and have a large impact on the total figures.
There was a quarter-on-quarter increase of +15.2% in UK imports of goods (excluding precious metals) driven by increases from both EU and non-EU countries but UK exports of goods fell by -0.3% which meant that the trade gap widened to £62.1 billion. The impact of price changes is worth noting as on the volume measure, imports grew by +6.3% while exports fell by -2.2%.
There was an increase in imports at current prices from the EU across a number of products/commodities but the rise of £6.1 billion for machinery & transport equipment stands out as a clear driver of the growth in imports; the effect of the changes in data collection on this figure are not clear. For the non-EU trade, the biggest change was an increase of £4.3 billion on the import of fuel – a significant chunk of this growth will be price driven.
The changes to export values (and volumes) are more muted with the most significant being a fall of £0.9 billion in UK exports of machinery & transport equipment to the EU while there was a similar fall in UK exports of fuel to non-EU countries which, for this category, was partially balanced by a rise in fuel exports to the EU.
You can download the ONS statistical bulletin and data-sets from their website at https://www.ons.gov.uk/releasecalendar (12 May) or request it from MTA.