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ECONOMIC NEWS

CBI Industrial Trends Survey, February 2021:  The latest report from the CBI Industrial Trends Survey (ITS) shows that manufacturing activity has deteriorated over the last month although the hit was less than in previous lockdowns.  It is worth noting that although the report refers to February, data collection took place between 27th January and 12th February so the trends identified are more likely to be the three months to January (November 2020 to January 2021).

Manufacturing output fell slightly in the latest 3-month period although, with 11 of the 17 sub-sectors showing growth, it was the sharp falls in the motor vehicles & transport equipment (one category in the ITS) and food & drink sub-sectors that drove the negative trend.  Although respondents anticipate that manufacturing output will only be flat over the next three months (effectively February to April), this is good news in that it marks an improvement from the significantly negative outlook in the previous survey.

Total order books, while still negative and below their long-run average, also showed an improvement from the levels recorded in the January survey but this seems to be driven by the home market as export order books worsened compared to the previous survey and are well below their long-run average.

You can get the Press Release of the CBI ITS from their web-site at www.cbi.org.uk/media-centre (19 February) or request it from MTA.

UK Productivity, 4th Quarter 2020:  Data published by the Office for National Statistics (ONS) shows that whole economy productivity, measured by output per hour, fell by -1.1% compared to the same period a year earlier.  The other main measure of productivity is output per worker and this fell by -6.3% compared to the final quarter of 2020 with the larger fall reflecting retained employment through the furlough scheme (CJRS).

Compared to the previous quarter (Q3-20), output per hour fell by -4.5% as total hours worked recovered faster than output (measured as gross value added in the economy).  Output per worker increased by +1.4% compared to Q3 as the number of workers on furlough continued to decrease.

Looking at the analysis by sector, the whole economy decline in output per hour of -1.1% compared to a year earlier was generated by a large fall in the energy sector (part of what the ONS terms as non-manufacturing production) at -13.5%, while service sector productivity was also down slightly (-0.2%).  In contrast, both manufacturing (+1.7%) and construction (+4.5%) saw output per hour higher than at the end of 2019.

Within manufacturing, there is a divergence of trends with growth in output per hour in some industries - most notably for MTA members in basic metals and metal products at +9.3% - while both food & drink (-4.9%) and transport equipment (-5.4%) saw a decline compared to the 4th period of 2019.

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 (23 February) or you can request it from MTA - we have also analysed the sector and industry data and can send that spread-sheet if you are interested.

European Commission Economic Sentiment Indicator and Capacity Utilisation, February 2021:  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 (financial services is not included in the ESI) to compile its Economic Sentiment Indicator (ESI).  As with the CBI survey (see above), because of the data collection periods, the month is that in which the data is published, although it really refers to the previous month so these results really apply to January despite the title.

The headline shows a pick-up in the ESI in both the EU and the sub-set of the Euro-zone compared to the previous month and the index is now at its highest level since March 2020 - effectively this is February and, therefore, the last month before the effects of the Coronavirus outbreak were felt.  Confidence in the retail industry fell, although there was an improvement for consumers, perhaps with the vaccine roll-out giving them a longer-term view than the shops they still cannot use.  Confidence also improved in industry and services and was flat in construction, while financial services (not part of the ESI calculation) was the weakest of the sectors in this report.

The 3rd consecutive improvement in confidence in the industry sector (broadly manufacturing) was thanks to improvements in all three elements of the calculation - expectations for output over the coming 3 months had the sharpest increase but there was also an improvement in the respondents’ assessments of the current level of order books and in stocks of finished goods.  The report also tracks export orders and output over the previous 3 months and, although not included in calculating industry confidence, both of these measures were also at a better level than in the previous report.

There is also a mixture in the sentiment among the largest European economies;  Poland, Italy and Germany all saw a significant improvement, with more modest growth in France, but Spain and, to a lesser extent, Netherlands had a significantly negative trend at the whole economy level.

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 it can be requested from MTA.

UK Trade (including for machine tools), 4th Quarter and 2020:  The UK’s trade deficit  for goods narrowed in 2020 to its lowest level since 2012 at £116.0 billion.  UK exports of goods fell by -16.5% to £311.5 billion while imports were down by -15.1% to £427.5 billion.

For exports, there was a slightly larger fall in trade with the non-EU countries, as a result of which, goods sent to the European Union accounted for 47% of total goods exports.  Imports from the EU accounted for 53% of the total with a similar decline in arrivals from the region and the rest of the world.

For the 4th quarter of 2020, exports of goods increased by +7.6% compared to the previous quarter but were still -20.2% lower than a year earlier.  For imports, the quarter-on-quarter growth rate was double that for exports at +15.7%, with the level +6.0% higher than in the final period of 2019.  As a result, the trade deficit for goods in the 4th quarter of 2020 expanded to £42.4 billion, the 2nd highest level on record.

The increase in both exports and imports compared to the 3rd quarter was mainly driven by machinery & transport equipment and chemicals.  There were two factors at play in the increase in arrivals of chemicals with advice to stockpile medical supplies ahead of Brexit driving up imports of pharmaceuticals and the arrival of 22 deliveries of the Pfizer/ BioNTech Covid-19 vaccines increasing imports of “other chemicals” from Belgium.

There was also an increase in imports of road vehicles which by the end of 2020 was running at its highest rate since May 2019, although there may well have also been an element of pre-Brexit stockpiling of components in the broader transport equipment category.

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.

We have also been crunching the numbers for our industry and have, so far, completed the data for machine tools.  Exports from the UK in 2020 were worth £393.2 million, a reduction of -25% compared to 2019 and the lowest annual total since 2009 at the height of the financial crisis.  Imports fell by -29% to £417.6 million, the lowest since 2010;  this small variation in timing makes sense in that imports reflect a delivery and not an order - the latter would have been weak in 2009 leading to the low level of imports the following year.

Exports of machine tools from the UK to European Union fell by -35% while shipments to the rest of the world were not quite as weak with a fall of -15%.  This was helped by an increase of +52% in deliveries to the USA which was our top export market for the first time since 2016;  there was also an increase in exports to Brazil which was in the top ten for the first time since 2011.

Imports from the European Union fell by -30% while arrivals from the rest of the world declined by -28%;  there was no change in the top four import sources which are still Germany, Japan, China and the USA, with Italy moving up to 5th place, its highest ranking since 2007.