European Industrial Output, December 2020: The data published by Eurostat covers industrial production and, while most of this is manufacturing activity, it also includes the output of the extraction and utilities industries. Total industrial production in the Euro-zone in December fell by -1.6% compared to the previous month, with the EU as a whole seeing a month-on-month decline of -1.2%. Comparing the latest figures with December 2019, industrial production decreased by -0.8% in the Euro-zone and by -0.4% for the EU.
For 2020 as a whole, this means that total industrial production in the Euro-zone was -8.7% lower than in 2019 with the EU having a reduction of -8.0%.
Within the total, output of the capital goods industries led the decline in the month-on-month trend with a fall of -3.1% in the Euro-zone (compared to November 2020) and -2.8% for the EU. In part, this reflects the higher levels of volatility for this sector but it is also a reversal of the strength recorded in November which may suggest that the usual seasonal adjustments have been thrown out by the events of the past year.
Looking back to December 2019, capital goods is the 2nd weakest sub-sector (behind non-durable consumer goods) with reductions of -3.1% for the Euro-zone and -2.8% in the EU. Also, on this basis, of the 24 Member States for which data is available, total industrial production increased in 12 and fell in the other 12. The fastest growth was in Slovakia (+6.8%) and Poland (+6.1%) while the largest reductions were in Belgium (-4.6%), Malta and Portugal (both -4.3%).
The Eurostat News Release can be downloaded from their web-site at https://ec.europa.eu/eurostat/news/news-releases (15 February) or requested from MTA.
UK Investment, 3rd/4th Quarter 2020: As part of the GDP data released at the end of last week, we also got an update of the investment figures, although the detail by industry was only for the 3rd quarter of 2020. This showed an increase compared to the 2nd period of the year of +12.8% for total manufacturing investment and, within that, growth of +14.0% for spending by the engineering & vehicles industries (capital expenditure by this group of industries accounted to nearly 46% of total manufacturing investment).
However, looking back to the 3rd quarter of 2019, manufacturing investment fell by -4.9% and the engineering & vehicles industries saw a decline of -8.9%. Another way of assessing the longer-term trends is to look at the rolling 4-quarter changes - for the whole manufacturing sector, investment over the latest 4 quarters (Q4-19 to Q3-20) was -0.3% lower than in the previous period (Q4-19 to Q3-19), while the engineering & vehicles industries saw growth of +8.6% on the same basis.
The only data we have for the 4th quarter covers total business investment; this was +1.3% higher than in the 3rd period of the year but -10.3% lower than at the end of 2019. The breakdown by asset type gives us a figure for spending on “ICT & other machinery” which had quarter-on-quarter growth of +4.2% and was +1.1% higher than in the final period of 2019.
For 2020 as a whole, total business investment was -10.7% lower than in 2019 but spending on ICT & other machinery only fell by -6.4% - this category accounted for almost 29% of total business investment in 2020 (an increase from the 27½% in 2019).
You can get more details from the ONS Statistical Bulletin for Business Investment which can be downloaded from their website at https://www.ons.gov.uk/releasecalendar (12 February) or you can request it from MTA.
USMTO and CTMR, December 2020: The US Manufacturing Technology Orders (USMTO) programme tracks orders in the US market, based on the reports from participants. In 2020, total orders recorded in the survey were worth $3.87 billion, of which metal cutting machines accounted for $3.78 billion (97.7%). Total orders were -15.3% lower than in 2019 which, in an interesting reflection of the US market over the past three years, was itself -16.8% lower than the 2018 figure (this was a bumper year for orders in the USA).
Not all of the regional totals for manufacturing technology orders were published for confidentiality reasons - like us, AMT struggle to get coverage of the metal forming and fabrication market - but looking at the trends for the metal cutting machines, the percentage changes range from only -3% in the South-East up to -22% in the North-East and -28% in the South-Central area.
In noting that December was an excellent month with the highest order total since October 2018 (post-IMTS that year), our colleagues at AMT point to pent-up demand, depleted inventories, continued reshoring, several Covid vaccines and a lot of cash as reasons to be optimistic for a strong start to 2021. It is also worth noting that approval for a resumption of flying of the Boeing 737MAX means that the aerospace industry did better than it has for some time, although the low level of air traffic will hold back the recovery in this industry.
The US Cutting Tool Market Report (CTMR) tracks orders for tooling on a similar basis; in 2020, cutting tool orders were worth $1.91 billion, a decline of -22% compared to 2019 - it is worth noting that, unlike machines, cutting tool orders had been broadly flat in 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.
European GDP, 4th Quarter 2020: Eurostat has also updated its estimates for GDP at the end of last year with the final quarter now estimated to have been down by -0.6% for the Euro-zone (previously -0.7%) and -0.4% for the EU (revised from -0.5%).
For 2020 as a whole, the Euro-zone economy is estimated to have contracted by -6.8% with a fall of -6.4% for the EU - both of these are unchanged from the previous estimate. Note that this compares with a decline of -9.9% for the UK economy in 2020.
The quarter-on-quarter reduction is interesting because, of the 20 EU Member States that have published their figures for the final period of the year, 15 showed an increase in GDP and only 5 had a decline. The key to this, in part at least, is the fact that the 5 countries with a reduction were Austria (-4.3%), Italy (-2.0%), France (-1.3%), Poland (-0.7%) and Netherlands (-0.1%), while Germany only registered growth of +0.1%; larger economies, of course, have a bigger impact on the regional trends.
This is significant because the 1st quarter of 2021 is almost certain to see a contraction in most (if not all) economies, so a negative figure for the final quarter of 2020 would mean that a country will meet the definition of a recession (all the economies grew in Q3-20). For the 5 countries with a negative trend in Q4-20, this would be a double-dip recession as they all saw their economy contract in both Q1 and Q2 2020 (as did many of the other EU Member States).
The Eurostat News Release can be downloaded from their website at https://ec.europa.eu/eurostat/news/news-releases (15 February) or requested from MTA.