UK Manufacturing Output, December 2020: Publication of the December figures by the Office for National Statistics (ONS) also brings us the data for both the 4th quarter and for 2020 as a whole. The headlines show that manufacturing output grew by +0.3% in December and by +3.3% for the 4th quarter (compared to the previous quarter) but that output of the manufacturing sector as a whole contracted by -9.9% compared to 2019.
Manufacturing covers a number of industries, many of which are of little interest to most MTA members so we need to dig into the detail. At the sub-sector level, the most interesting area is capital goods and these industries saw month-on-month output growth of +0.1% in December but thanks to a strong recovery earlier in the two previous months, the quarterly growth rate was +6.5% - this was the fastest of the sub-sectors of manufacturing. However, this apparently good outcome is partly because the capital goods sub-sector was hardest hit earlier in the crisis and this is reflected in the fact that it had the largest fall in output for 2020 as a whole at -16.7%.
To avoid an overload of numbers, we are going to focus mainly on the quarterly and annual trends as we go through the various industries. As we have already seen some data for the automotive industry (see https://www.mta.org.uk/resources/economic-news-34 for our review of the unit production data for cars and engines in 2020), we will start there. Overall output of the industry fell by -25.6% in 2020 with the growth of +22.1% in the 4th quarter not being enough to counter the extremely low level of activity in the 2nd period of the year. It is, however, worth noting that output was higher than in the 4th quarter of 2019 – this is the only industry that we cover for which this is the case, although it probably tells you more about 2019 in the automotive industry than it does about the current situation.
In its summaries, the ONS notes that it is the transport equipment group of industries that led the recovery in the 4th quarter and the other major element of this for the UK economy is the aerospace industry. This saw a similar fall in output in 2020 at -26.7% but the quarterly pattern was very different; output did not fall as dramatically as in the automotive industry but has failed to show much of a recovery since the low point of the 2nd quarter and, indeed, also saw another contraction of output in the final quarter of the year at -3.5% (the only one of the industries that we cover to see output fall in Q4-20).
The machinery industry saw output decline by -20.1% in 2020 and this followed a reduction of -7.5% recorded in 2019 so it has been a bad couple of years for this industry. There was some better news with growth of +7.6% in the 4th quarter which took the output level in December to 96% of the level this industry recorded in February before the Coronavirus outbreak took effect. At this point, it is worth noting that the December-to-February ratio for the automotive industry was 104% while for aerospace it was only 63%.
The final industry in our key portfolio is metal products - this is important because a substantial proportion of it is made up of metal working sub-contractors. While a poor figure, in comparison with the other key industries, output “only” fell by -9.6% in 2020 (the least bad of the four that we cover) and it recorded a quarter-on-quarter growth rate of +6.4% in the final period of 2020. The ratio of the output levels of December to February was 97% for the metal products industry.
You can download the ONS Statistical Bulletin from their web-site at https://www.ons.gov.uk/releasecalendar (15 January) or request it from MTA; we also have an analysis of the key industries which is available to members - please contact Geoff Noon (firstname.lastname@example.org) if you would like these charts.
UK GDP, December, 4th Quarter and full year 2020: As with the manufacturing output data, December’s figures for GDP from the ONS also bring us the 4th quarter and 2020 results. Working backwards through this list, the UK economy contracted by -9.9% last year - this is the largest reduction on record for the UK economy as a result of the decline in the first half of the year and mainly in the 2nd quarter during the first lockdown.
The 4th quarter of 2020 did see some growth despite the various versions of lockdown 2 between the countries of the UK and the economy overall was +1.0% larger than in the 3rd quarter. This puts us at about the same quarterly rate of growth as the USA but ahead, for this quarter at least, of the major European economies; there, the best performing were Spain (+0.4%) and Germany (+0.1%), while France (-1.3%) and Italy (-2.0%) saw a contraction in the final period of 2020.
The three major sectors of the economy saw growth in the 4th quarter; we have already noted the improvement in the manufacturing sector which lay between the growth of +4.6% in construction and just +0.6% for the service sector. This latter figure hides a divergence between the industries within this very large sector; there was quarter-on-quarter growth in areas such as health & social work and education (with schools largely back to face-to-face learning) while the hospitality and retail industries contracted in the face of the various lockdown restrictions.
Finally, the month of December saw GDP growth of +1.2% following a revised fall of -2.3% in November. However, there is again a mixture of trends by sector -services grew strongly at 1.7% as the lockdown restrictions in November were eased (for most of the month) while manufacturing output only grew by +0.3% and the construction sector saw a fall of -2.9% - the latter is probably driven by an early shutdown of sites for the holidays in the face of the social distancing measures.
You can get more details from the ONS Statistical Bulletin which can be downloaded from their web-site at https://www.ons.gov.uk/releasecalendar (12 February) or you can request it from MTA.