UK National Accounts, 2nd Quarter 2020: With the release of the quarterly national accounts the Office for National Statistics (ONS) has started the process of re-basing UK economic statistics to 2018. This complicates comparisons with previous estimates as there may be some impact from the new base year but the headline shows that the UK economy is now estimated to have contracted by -19.8% compared to the 1st quarter of the year – this is slightly better than the previous estimate of -20.4%.
Over the past 4 quarters, the UK economy is now estimated to have contracted by -21.5% (a smidgeon better than the previous estimate of -21.7%). In an economy wide weak performance, it was the construction sector that was hardest hit in the first two quarters of 2020.
Normally, given that the GDP data is only an update of previously published figures, the most important data in this release is the detailed investment figures by industry but this has been delayed so all we have is an update on the overall business investment data and spending by asset type. Here there is good news, of sorts; although both were very weak in the 2nd quarter, the trends have been revised to be less bad than in the first release of the data.
Total business investment was -26.5% lower than in the 1st period of the year (-31.4% in the initial estimate) and -26.1% (-31.3%) down on a year earlier. For the sub-set of spending on “ICT and Other Machinery”, the trends were -16.6% (-25.9%) and -15.8% (-20.5%) respectively.
There are more details in ONS Statistical Bulletin for the National Accounts which you can download from their web-site at https://www.ons.gov.uk/releasecalendar (30 September) or you can request it from MTA.
European Commission Economic Sentiment Indicator, September 2020: The European Commission (EC) draws from a range of surveys to construct confidence indicators for six sectors of the economy and then uses five of these to make up its Economic Sentiment Indicator (ESI). The latest round of results showed that the economic recovery is continuing, although pace of growth slowed in September. In both the Euro-zone and the EU overall, the ESI has recovered nearly 70% of the losses recorded in March and April.
The continued improvement in the ESI was driven by further waning of pessimism in industry, retail trade, construction and, in particular, services. There was a smaller improvement in consumer sentiment but the best improvement was in the financial services sector which has recovered nearly 90% of its losses from earlier in the year – however, this sector is not included in calculating the ESI.
At a country level, all of the larger euro-zone economies had a positive trend in September. The recovery of confidence that was lost as the Covid-19 lockdown took effect ranges from 55% in Spain to 80% in Germany.
The improvement in industrial confidence was driven by more positive assessments of the adequacy of finished stocks and the current level of total order books, although there was little change in expectations for production in the coming 3 months (this was already above pre-crisis levels by July). Two other factors are tracked but not included in the confidence indicator and while both output over the past 3 months and export order books continued to recover, this was at a slower pace and they remain well below the levels in February before the crisis hit activity.
You can download the EC 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 you can request it from MTA. Note that the references to the month cover the date of publication - the data collection period runs broadly one month behind this date.
BEAMA Contract Price Adjustment Service: Do you have long-term contracts, either with customers or suppliers? Have you thought about incorporating something in the contract that allows you to adjust the price according to changes in input costs?
On behalf of members, MTA subscribe to a service provided by our colleagues at BEAMA which gives a monthly track of key indices on labour and materials costs. Of course, you need to get the principle and the relevant formulas included in the contract, but this gives you a way of updating the relevant prices independently.
If you would like more details on this, please contact Geoff Noon (email@example.com) at MTA; we can send you a copy of the latest report and some typical formulae and can have a discussion about whether or not this would be useful for you.
CECIMO Economic & Statistical Toolbox, 2nd Quarter 2020: the new edition of the CECIMO Toolbox has been released and you can download this below or from the CECIMO web-site at https://www.cecimo.eu/economic-data/toolbox/.
As always, the information is grouped around the 5 themes of data for the sector, demand, investment, business climate and general economic indicators. Inevitably, the 2nd quarter was impacted by the Coronavirus outbreak across Europe and it was one of the weakest period recorded for the sector. Orders for manufacturers in the 8 major nations fell by -49% compared to a year earlier.
Business sentiment started to improve towards the end of the quarter with positive trends (from a low level) for both the PMI and the OECD’s Business Climate Indicator. However, while demand is improving, it will take some time to get back to pre-crisis levels.