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Economic News

CBI Industrial Trends Survey, October 2020:  Before we look at the results of the CBI Industrial Trends Survey (ITS), it is perhaps important to note that the data collection period was from 25th September to 13th October.  This was before the latest lockdowns under the impact of the Coronavirus and, at least initially, was a period when a Brexit trade deal looked likely.  There may, therefore, have been some shift in sentiment since the data was collected.

The headline of the survey shows that manufacturing activity remains weak although the situation has improved since the equivalent survey three months earlier.  Output volumes are still falling, but at a slower pace and total new orders have stabilized since the large decrease recorded in July.  Respondents to the survey put the effect of Covid-19 as leading to output volumes being about 15% lower than “normal”.

Output volumes in the past 3 months (effectively the 3rd quarter) fell at the slowest pace since March (this is a monthly series) and declined in 10 of the 17 sub-sectors covered by the ITS.  The report notes that aerospace manufacturing is the weakest of the sub-sectors, although their sample size is small for this industry.  The slower fall in output has led to fewer firms operating below capacity and further improvement is expected to the end of the year with output expected to grow at a modest pace in the final quarter.

Total new orders in the quarter to October were broadly flat compared to the previous period, although it should be noted that the 2nd quarter saw a sharp fall which the latest data suggests has not yet been reversed.  This overall trend was made up of a small increase in domestic orders while export orders were still down but at a much slower pace than in the July survey.

This was one of the more detailed quarterly surveys which brings the data on investment intentions.  The overall indicator for spending on plant & machinery over the coming twelve months are still negative, although much less so than in either the April (a record low point) or July surveys.  The weakness in activity is confirmed by the fact that the percentage of firms who expect to invest to expand capacity fell to its lowest level since October 2010.

There are, however, some interesting trends in the question about constraints to investment; the responses relating to funding (internal, external and costs) fell back to broadly average levels having spiked in the two previous surveys.  In part this is because there look to have been far fewer multiple responses to this question, although that also tells us something about an easing of the general situation.

You can read the CBI Press Release on the ITS on their web-site at www.cbi.org.uk/media-centre (22 October) or request it from MTA - we can also send you an overview of the latest results.

UK Investment, 2nd Quarter 2020:  The Office for National Statistics has finally published the re-based investment data by industry groups that should have been released at the end of September.  There have been some extensive revisions to the previous figures, including the total elimination of the sharp fall in manufacturing investment in the 1st period of 2020, although this has now been replaced by the expected fall in Q2.  This brings it more into line with the overall business investment data that was already available.

For manufacturing, investment is now estimated to have seen a quarter-on-quarter increase of  +3.6% in the 1st quarter of the 2020 but this was followed by a fall of -32.9% in the 2nd quarter.  For the Engineering & Vehicles industry, which accounts for about 48% of manufacturing investment, there was growth of +8.4% in Q1 and then a reduction of -33.5% in Q2.  Comparing the 2nd quarter of 2020 with the level of a year ago, manufacturing investment is down by -31.4% with a fall of -30.6% for the Engineering & Vehicles industry.

All of these trends for the 2nd quarter are a little larger than for the overall business investment trends, although this is partly because of the modest increases in the 1st quarter of the year while the business investment figure was broadly flat in the quarter-on-quarter trend at the start of 2020.

You can download the ONS data-set from their web-site at https://www.ons.gov.uk/releasecalendar (21 October) or you can request the updated tables from MTA - contact Geoff Noon (email:  gnoon@mta.org.uk).

USMTO and CTMR, July 2020:  The US Manufacturing Technology Orders (USMTO) programme tracks orders in the US market, based on the reports from participants.  For January to August 2020 orders were -24% lower than in the first eight months of 2019.  Given the latest monthly trends, it now looks likely to level off at around this level for the year as a whole.

The regional breakdown of the data continues to suffer from confidentiality problems so we have to use the data for metal cutting machines only - this is only a small distortion since at a national level, these accounted for nearly 98% of the total market tracked by the survey.  The data shows that the only region not to experience double-digit declines when comparing the first 8 months of 2020 to the same period in 2019 was the South-East which recorded a reduction of just -2½% for metal cutting machines.  Three of the other regions saw orders falling by more than 30%;  this was led by the South-Central area at -36% (although it is worth noting that this is the smallest region), with the North-East and North-Central-West both down by -32%.

The US Cutting Tool Market Report (CTMR) runs in parallel and tracks orders for tooling and for the first eight months of 2020, consumption is running at -23% lower than the level for January to August 2019.  There is no regional breakdown in this report.

You can download the press releases for the two surveys from the AMT web-site at www.amtonline.org, with the CTMR release also published on the USCTI web-site at www.uscti.com;  alternatively, you can request either or both releases from MTA and we can make sure you get them when they are published each month.