UK Manufacturing Output, February 2021: The latest data for manufacturing output from the Office for National Statistics (ONS) showed an increase of +1.4% compared to January, leaving it -4.2% lower than a year earlier immediately before the impact of the Coronavirus pandemic. This month-on-month improvement was repeated in 7 of the 13 sub-sectors, led by transport equipment (although as we will see later this was not evenly spread across this grouping) and computer, electronic & optical products.
However, we prefer to focus on the rolling 3-month trend and total manufacturing output in the latest 3 months (December 2020 and January and February 2021) was -0.5% lower than in the previous 3 months (September, October and November 2020) and -3.8% lower than a year earlier (December 2019 and January and February 2020). The rest of these notes will focus on these two comparisons.
Manufacturing covers a wide range of industries including things like food & drink and chemicals which have very little direct impact on demand for most MTA members. The key industries are mostly in the capital goods sub-sector and this is still showing signs of the larger impact of the pandemic compared to manufacturing as a whole with output -0.9% lower than in the previous 3 months and a fall of -8.8% compared to a year earlier.
The trends for our 4 key industries show some interesting divergences in the latest data and fall broadly into 3 groups - up, flat and down. Starting with the good news, output of the machinery industry was +4.1% higher than in the previous 3 months although even this is not enough to balance the effects of the pandemic and output was still -4.9% lower than a year earlier. The middle position is the metal products industry where output was virtually unchanged (+0.1%) compared to the previous 3 months (thanks mainly to a strong month last December) but -5.4% down on a year earlier.
We have already hinted at both positives and negatives in the trends for the transport equipment group but this is mainly in the month-on-month data where strong growth in the automotive industry (following a weak January figure) is in contrast to the continued weakness in aerospace which was broadly unchanged at a low level. There may be a timing issue, perhaps related to the seasonal adjustment because the count of the number of cars and engines manufactured which is released by SMMT shows a dip in December (holidays), followed by a recovery through January and February.
Returning to the ONS output data and looking at the rolling 3-month trends, the automotive industry saw output fall by -3.5% compared to the previous 3 months (largely due to the weak figure for January) but was only -5.1% lower than a year earlier. In contrast, the aerospace industry has seen falls in output of -8.7% and -38.1% respectively; the latter figure reflects the failure of this industry to show much in the way of a recovery from the pandemic induced low point in May 2020 - there was a small improvement last Autumn but this seems to have dropped away again.
Another way of looking at the impact of the Coronavirus outbreak is to compare the level of output in the latest month (February 2021) with the pre-pandemic level - we take the February 2020 reading for this. While the machinery industry is at 96% of the level a year ago, automotive stands at 95% (although that was already weakening before Covid-19) and metal products is at 92%, output of the aerospace industry in the latest month is only 61% of where it was in February 2020.
You can download the ONS Statistical Bulletin from their web-site at https://www.ons.gov.uk/releasecalendar (13 April) or request it from MTA; we also have an analysis of the key industries which is available to members - please contact Geoff Noon (email@example.com) if you would like these charts.
UK GDP and Trade, February 2021: The monthly GDP data released by the ONS was broadly in line with expectations in showing an increase of +0.4% compared to January but this was -7.8% lower than a year earlier - February 2020 is often taken as the last pre-pandemic month, so we could expect to see this trend start to reverse in March and certainly in April when the full effect of the first lockdown was being felt in the economy.
It should also be noted that the ONS has revised the data for January which now shows a month-on-month fall of -2.2% (originally published as -2.9%) so our preferred measure of the rolling 3-month trends don’t fall quite as neatly in line with expectations. In the latest 3 months, the UK economy contracted by -1.6% compared to the previous 3 months and was -7.5% smaller than in the same period a year earlier.
With the economy, the construction sector saw a -1.0% fall in output compared to the previous 3 months - this is the first negative trend for this sector since the 3-month block to June 2020 - although the pace of decline compared to the same 3 months a year earlier eased slightly to 5.9% (matching the pace we saw for the 4th quarter of 2020). With lockdowns having a particular effect on the close contact elements of the service sector, output here in the latest 3 months was -1.9% lower than in the previous 3 months (the same pace as the 3 months to January) and -8.3% lower than a year earlier.
The monthly GDP series is based only on the output measure but although not part of these calculations, the ONS has also released the trade (export/import) data for February. Following the downturn in trade in January, these show a partial recovery with a particular focus both in the ONS release and the associated headlines on trade with the European Union.
Exports of goods to the EU, excluding the very volatile data for non-monetary gold and other precious metals, partially rebounded in February 2021, increasing by £3.7 billion (46.6%) after a record fall of £5.7 billion (negative 42.0%) in January. The increases in exports to the EU in February 2021 were driven by machinery & transport equipment and chemicals, especially cars and medicinal & pharmaceutical products.
Imports of goods from the EU, again excluding non-monetary gold and other precious metals, showed a weaker increase of £1.2 billion (7.3%) in February 2021 after a record fall of £6.7 billion (negative 29.7%) in January. The more modest increase in imports from the EU were also driven by machinery & transport equipment and chemicals and the same sub-elements as for exports.
However, we need more data to assess the true impact of Brexit on our trade patterns. For the chemicals industry in particular, there was a high level of stock-building from the EU at the end of 2020 which will have affected the level of imports even into February so it is not clear that we are back to a “new normal” for post-Brexit trading. Another complication in the data is the impact of the global shortage of semi-conductors on the automotive and electronics industries.
You can get more details from the ONS Statistical Bulletins for the monthly GDP and UK Trade which can be downloaded from their web-site at https://www.ons.gov.uk/releasecalendar (13 April) or you can request them from MTA.
European Industrial Output, February 2021: The European industrial production data has also been published by Eurostat although they use a different format which makes calculating the 3-month rolling averages more difficult. You should also note that their top level data is for industrial production and while manufacturing makes up the majority of this, the wider definition also includes output of the energy, extraction and utilities industries.
In contrast to the UK trends, total industrial production in the Euro-zone was -1.0% lower than in January - its first significant reduction since the start of the recovery from the low point in May 2020 - and was +0.9% lower in the EU. Compared to February 2020 (which was the high point before the impact of the Coronavirus outbreak), output fell by -1.6% in the Euro-zone and by -1.1% for the EU.
The month-on-month fall in industrial production was led by the capital goods industries where output was -1.9% lower than in January for both the Euro-zone and the EU as a whole. The comparison with February 2020 shows that the largest reductions in output were in the non-durable consumer goods sub-sector but the next largest falls were in capital goods at -2.2% for the Euro-zone and -2.4% for the EU.
Still on the 12-month comparison, among the 24 Member States for which the February 2021 data is available, total industrial production increased in 10 and fell in 14; the largest reductions were Malta (-10.9%), Estonia (-8.9%) and France (-6.4%) while the strongest growth was in Ireland (+41.4%), Lithuania (+9.7%) and Finland (+5.6%).
The Eurostat News Release can be downloaded from their web-site at https://ec.europa.eu/eurostat/news/news-releases (14 April) or requested from MTA.