UK GDP, 3rd Quarter 2020: The headline GDP data from the ONS shows the largest ever quarterly growth rate at +15.5% in the 3rd quarter but this follows the largest ever reduction of -19.8% in the 2nd quarter. From this it is clear that despite the record growth rate, the UK economy has not recovered the losses it saw in the previous quarter and that is before we take into account the decline of -2.5% registered in Q1. These trends leave the UK economy -9.6% smaller than it was a year ago at the end of Q3-2019.
We have already looked in detail at the manufacturing sector - see separate article - but the ONS also reports record quarterly growth rates for the services and construction sectors; of course, as with the whole economy, these follow record-breaking falls in Q2.
If we look just at the effect of the 2nd and 3rd quarter changes (ignoring for now the decline in Q1 in all three sectors), we see that manufacturing actually recovers a little more strongly than the other two sectors. If we set Q1 at 100, by the end of Q3, an index for the service sector recovers to 92.2 and for construction (despite growth of +42% in Q3) only back to 91.1, while the equivalent calculation for manufacturing takes us to 93.6.
Although the quarterly (or 3-month rolling) trends are more reliable, it is worth just taking a look at the monthly data. This shows GDP growing by only +1.1% in September which is roughly half the rate we saw in August and well below the July growth rate of +6½%. While most sectors of the economy were growing in July as the post-lockdown bounce continued, growth in August was mostly concentrated in the hospitality sector where the “Eat-out to Help-out” scheme boosted activity. This led to a reversal in this sector in September when that boost ended but some other sectors such as professional scientific & technical activities, education and health & social care took on the mantle of supporting growth. Manufacturing largely stagnated in August and September, as did construction although the latter did provide some support for growth over the last couple of months.
There are more details in ONS Statistical Bulletins for September and Q3-20 GDP which you can download from their web-site at https://www.ons.gov.uk/releasecalendar (12 November) or you can request it from MTA.
UK Investment, 3rd Quarter 2020: The quarterly GDP data also brings the first look at figures for investment, although at this stage we only have the high-level data for total business investment. This as reported to be +8.8% higher than in the 2nd quarter although as this had been the lowest figure since the 2nd quarter of 2011, this is only a very modest recovery and much less than for most other aspects of the economy. The latest figure is still -20.7% lower than a year earlier (Q3-19) and the rolling 4-quarter trend is showing a decline of -10.8% - this trend is likely to weaken over the next couple of quarters as business investment was still relatively strong in the 1st period of 2020.
The only breakdown that we have shows spending by asset; one of the categories here is for investment in “ICT & Other Machinery” - a wide ranging group of activities but most relevant to this sector and our customers. The quarter-on-quarter trend is similar to that for total business investment with growth of +8.9% in the latest period; however, this is only a reduction of -13.2% compared to a year earlier, although the rolling 4-quarter trend is a little weaker than for total business investment at -11.2%.
UK Automotive Output, September 2020: The latest data from SMMT shows an increase in output of both cars and engines in September compared to August - indeed, the latest month saw the highest number of cars and engines produced since February and January of this year respectively.
However, the rolling 12-month total for car output has fallen below 950,000 in this period to September 2020 - its most recent peak was over 1¾ million in March 2017. For engines, the total for the latest 12-month period was just over 1.9 million against a peak of 2.8 million in the 12-months to May 2018. This trend will be affected by the closure of the Ford factory at Bridgend at the end of September, limiting the scope for any further recovery in this part of the industry.
In the 12-months to September 2020, 82% of cars made in the UK were exported – this is back near the level that we saw in 2011/12. For engines, the export ratio is lower at 61% and, in this case, it has moved up from the level we saw in 2018/19 towards the ratio in 2017.
You can get the latest data from the SMMT web-site at https://www.smmt.co.uk/category/news/manufacturing/ or if you would like a fuller data-set and some useful charts, please contact Geoff Noon at MTA (email: firstname.lastname@example.org).
European GDP, 3rd Quarter 2020: The preliminary flash estimate from Eurostat suggests that GDP in the Euro-zone increased by +12.7% compared to the previous quarter but was -4.3% lower than a year earlier (Q3-19).
For the EU as a whole, the quarter-on-quarter growth rate was +12.1% leaving it -3.9% down on a year earlier.
This release of data only has figures for a few of the individual countries but that does include the four largest economies in the Euro-zone and these illustrate the general point that those who have the larger falls will appear to have the strongest recovery although this is not necessarily true when you look at levels. Therefore, while Spain saw GDP fall by -17.8% (the largest reduction) in the 2nd quarter and then had a growth rate of +18.2% in Q3, the more modest trends of -9.8% and +8.2% in Germany recover more of the downturn than in Spain.
Having said that, the growth in both France and Italy in the 3rd quarter more than outweighed the reduction in GDP in Q2, although both of these countries (and Spain) saw GDP contract by more than -5% in the 1st period of 2020.
The Eurostat News Release can be downloaded from their web-site at www. http://ec.europa.eu/eurostat (30 October) or requested from MTA.
CELIMO State of Trade Report, November 2020: CECIMO - the European grouping of associations representing importers and distributors of manufacturing technology - has compiled a new edition of its State of Trade Report. This provides a useful summary of key macro-economic data across 15 European countries and an indicator of the market trend for both machine tools and cutting tools in 2020 (with a few forecasts for 2021).
At the macro-economic level, the report covers the trends in GDP, unemployment, consumer price inflation and the manufacturing sector PMI. On the first of these, Turkey is the only country to have avoided a fall in GDP in 2020, mainly because the Covid-19 outbreak came a little later there and followed a strong 1st quarter. Only two countries -Poland and Switzerland - are expected to see GDP growth strong enough in 2021 to outweigh the anticipated reduction in 2020 (Turkey is, of course, also an exception to the general trend).
You can find the CELIMO State of Trade Report below. If you have any questions about this or would like to discuss this report, please contact Geoff Noon at MTA (email: email@example.com).