CBI Industrial Trends Survey, July 2023:  The latest data from the CBI Industrial Trends Survey (ITS) showed the first improvement in overall business sentiment for two years and that output volumes stabilized in the three months to July* after being on a steady downward trend since the February survey.

Output only increased in 4 of the 17 sub-sectors  including food & drink and motor vehicles & transport equipment.  The respondents expect output to improve in the next three months, although it has to be noted that these expectations have not been fulfilled in recent months.  One issue is that you can track the balance (responses of “up” minus “down”) or look at that balance against the long-run average.  The long run-average for the past three months view is +2 with the July reading at +3;  for the future period, the long-run average is +8 (implying that people are always a bit more optimistic about the future) with a July reading of +9 – hence the forward view that output will improve.  Looking at the comparison with the average suggests a no change forecast for Q3-23, similar to the outcome for the 2nd quarter.

Total new orders in the latest 3 months eased back and this reflects a slightly weaker picture for domestic business with export orders stable following 3 successive quarters of decline.  The expectations for the coming quarter are for orders to remain broadly flat.  Despite the relatively gloomy output and orders situation, employment in the manufacturing sector increased slightly in the latest three months having been flat in the April survey.

However, the main importance of this set of results from the ITS is the information on investment intentions from the quarter-end survey.  Overall expectations for spending on plant & machinery over the coming 12 months have slipped back to their lowest level since January 2021 bringing the run of positive balances to an end despite the fact that this was still a little above the long-run average for this measure.  By industry, there was an improvement in investment intentions for machinery and transport equipment but the indicator fell for metal products.

Among the reasons for capital expenditure, there was an increase in reporting of the need to expand capacity which remains above its long-run average, with replacement and increasing efficiency broadly flat compared to the April survey and both factors still below average.

There is also a question about the constraints to investment and both “cost of finance” and “shortage of internal finance” reached their highest levels since July 2020 to stand above their respective long-run averages.  However, both of these (and labour shortages) were still some way behind both “uncertain demand” and “inadequate return” which both saw a higher level of reporting than in the April survey while remaining below their respective long-run averages.

Finally, the measure of current rate of operations as a percentage of capacity fell to its lowest level since January 2021, having been exactly on the long-run average in each of the three previous surveys.

* Note that July is the month of publication;  with data collection taking place from 26 June to 12 July, it is likely that these results really refer to June, with the three-month blocks corresponding to the calendar quarters.

You can view the CBI press release on these survey results on their website at https://www.cbi.org.uk/media-centre/ (25 July) or we can let you have a copy of the summary of the results and some charts around the investment intentions data.


Flash Purchasing Managers Index, July 2023:  The flash manufacturing sector Purchasing Managers’ Index (PMI) published at the start of the week showed a further deterioration in activity levels in most of the limited range of countries for whom the estimate is available.

The UK reading slipped to 45.0 suggesting the fastest rate of contraction in activity in the manufacturing sector since the pandemic as it was below the most recent low point from December 2022.  Although this was mainly due to falling orders and output, the UK manufacturing sector also reported the largest improvement in suppliers’ delivery times since the index began in January 1992 and this also had a depressing effect on the overall index calculation.

There was a similar pattern in the Euro-zone with the overall PMI reading and the output element at 38-month lows and orders were falling more rapidly than output, suggesting a further decrease in production is likely over the next few months.  Ignoring the exceptional circumstances of the pandemic, the manufacturing PMI is at its weakest since 2013.  As in the UK, a further reduction in suppliers’ delivery times is also part of the reason for the fall in the PMI reading.

By country in Europe, the flash PMI reports are only available for Germany and France and as with the Euro-zone average, the overall PMI for manufacturing is at a 38-month low for both of them.  In Germany, both output and orders fell at an accelerating pace and employment was also marginally negative (the first time this has happened since January 2021).  For France, although the trends were the same, the pace was a little less than in Germany with the output element, while very weak, only slightly lower than in June.

Elsewhere in the world, only Japan and the USA have a flash manufacturing PMI published.  In Japan, the overall reading eased only slightly and at 49.4 (it was 49.8 in June), it is the strongest (or more accurately, least weak) of the countries with the flash estimates available.  Both orders and output were negative in the latest reading.

The USA provides the exception to the general trend of accelerating decline;  although still in negative territory, the flash reading for July of 49.0 is a significant improvement on the 46.3 registered for June.  This is driven largely by the output element which edged above the crucial 50 level having contracted last month but orders are still falling, although not as rapidly.

These reports are available on the “PMI by S&P Global” website at https://www.pmi.spglobal.com/Public/Release/PressReleases or on request from MTA.


Qimtek Contract Manufacturing index, 2nd Quarter 2023:  EIA member company, Qimtek (which runs a network of 250 UK-based subcontract engineering suppliers and over 4,000 registered manufacturing buyers) has published its Contract Manufacturing Index (CMI) for the 2nd quarter of the year.  This reflects the total purchasing budget for outsourced manufacturing in three categories each month which is then aggregated to a quarterly index.

The latest results show a significant drop in activity coming after what had been a strong start to 2023 in Q1.  The market was also down by nearly a quarter on its level in the same period in 2022.  With the baseline (100) for the index being the average level of business between 2014 and 2018, the CMI for the 2nd quarter of 2023 was 77 – this compares with 117 in the previous quarter and 101 a year earlier.

While some of this is attributed to the five bank holidays in the quarter (two in April, three in May, including an extra one for the Coronation) it was also clear that there was less activity from buyers, with June the weakest month of the quarter.

The fabrication market took the biggest hit compared to the previous quarter and only accounted for 40% of the market (having been 55% in Q1).  There was also a quarter-on-quarter fall in the market for machining but this was more modest and the level was higher than a year ago and the share of total business increased to just under half of the market in the latest quarter.  The “other processes” category is always the smallest and accounted for 10% of the market in Q2-23.

You can read more about this, including a look at the trends by industry, on the Qimtek website at https://www.qimtek.co.uk/news/engineering-capacity/subcontracting-market-down.


European Commission Economic Sentiment Indicator and Capacity Utilisation, July 2023:  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 used) make up its Economic Sentiment Indicator (ESI).  The other point to note is that, like the CBI survey, although labelled as “July 2023” or “Q3-2023”, data collection ran from 1st to 20th July so the data really refers to June or Q2-2023.

The overall ESI fell again in the latest reading for both the EU and the sub-set of the Euro-zone, although the decline was at a slower pace than in the two previous surveys.  In both cases it is at its lowest level since last October.  By sector, the main negative drivers this month came from industry and construction where falls in confidence were only partly off-set by an improvement for the retail trade and consumers;  service sector confidence was broadly unchanged.

Confidence in the industry sector weakened for the 6th month in a row as expectations for output over the coming quarter and the assessment of the current level of total order books fell significantly  and stocks of finished products were increasingly reported to be too large / above normal.  Two other questions are reported but don’t form part of the confidence calculation;  respondents were more negative about both output over the past quarter and export order books.

Among the largest EU economies, the ESI improved in Spain and Poland, was broadly unchanged in Italy, but fell in France, Germany and, to a lesser extent, the Netherlands.

The ESI is calculated as an index which is based on its long-run average;  Across the EU, there were 9 countries whose ESI was above 100 – Bulgaria, Croatia, Cyprus, Greece, Italy, Malta, Portugal, Romania and Spain;  of these, improvements in Spain and Portugal brought them back above 100 this month (note that Ireland appears to have left this survey as we have not had any results from them since the start of this year).  This survey also covers the EU candidate countries and Albania, Montenegro and North Macedonia all have an ESI in positive territory.

As with the CBI survey that we have reported on in the UK section, this is one of the quarterly reports that gives us data on capacity utilisation (CU) in the manufacturing sector.  The general trend this month parallels the UK situation with CU falling for both the EU and the Euro-zone, although with a more mixed picture by country.  Among the larger economies, the rate fell significantly in Austria, Belgium and Sweden, was also down in Germany, the Netherlands and Poland;  it was broadly flat in Italy and Spain but edged up in France and Hungary.  In most cases it was below the long-run average level, although Italy and Sweden bucked this trend. You can download the EC report and statistical annex 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 (open the drop down menu for 2023) or you can request it from MTA.

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