European Commission Economic Sentiment Indicator and Capacity Utilisation, April 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). Because of the data collection periods, the month (April) is that in which the data is published but the data really refers to March - similarly, for the quarterly data, reference to Q2 below is the publication date of figures that really relate to the levels, etc. in the 1st quarter of 2021.
The ESI continued its strong recovery in “April” for both the Euro-zone and the EU as a whole. Having been right on the long-run average (the base for the calculations of the ESI) in the previous months, the strong growth this time takes the series above its pre-pandemic level to its highest reading since September and November 2018 respectively. Confidence improved strongly in all 4 business sectors (industry, construction, services and retail trade) and among consumers - only financial services did not see a significant change compared with the previous month. Overall, a 2nd phase of recovery looks to be underway although the new wave of infections in some countries may restrict this in the short-term.
The largest economies in the EU (Germany, France, Italy, Spain, Portugal and Netherlands) all shared in this positive trend and, thanks to the increases in “April” are now all back above their long-run averages - something that only Bulgaria, Czechia, Greece, Cyprus and Hungary have yet to achieve.
For the industry sector the strong growth in “April” took the indicator to its highest ever level (the series starts in 2000) with very positive developments in the three questions that make up the indicator - respondents’ assessments of the current level of total order books, expectations for output in the coming 3 months and appraisals of stocks of finished goods. In addition, while they are not used to calculate confidence, there was also an improvement in export order books and output over the previous 3 months.
This was one of the quarterly surveys that gives the data for capacity utilisation. The measures for the EU and the Euro-zone improved for the 4th quarter in a row, the low point having been recorded in the April 2020 survey at the height of the initial impact of the Covid-19 outbreak. As a result, capacity utilisation in both the EU and the sub-set of the Euro-zone countries is back above its long-run average and is at its highest level for two years (Q2-2019).
Finally this report also features the results of the biannual industrial investment survey; this is slightly different from the investment intentions that we get for the UK from the CBI survey as it asks the rate of change in investment for, in this case, 2021 compared to 2020 (investment intentions is a balance between “up” and “down” with no measure of size of that change.
The survey shows an expectation of growth of +5% in real investment (measured in volume terms rather than values) in the manufacturing sector for the EU in 2021; this represents an improvement from the assessment last Autumn of no change. Similarly, for the EU, investment growth is now expected to be +7% (compared to +3% in the previous survey).
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.
USMTO and CTMR, February 2021: The US Manufacturing Technology Orders (USMTO) programme tracks orders in the US market, based on the reports from participants. In the first two months of the year, orders were +22.4% higher than in the same period in 2020 - remember that was really before the impact of the Coronavirus outbreak was being felt although the general market trend had been downwards.
The press release on these results highlights a surprising (given the weather conditions in February) uptick in orders from the oil & gas industry as well as an increase from medical equipment makers, perhaps reflecting the return to more normal conditions in hospitals as the US got the pandemic under control.
The regional analysis shows growth in 4 regions, led by the North-Central-East at +57% and North-Central-West with +33%, while the other two regions - South East and South Central both at -5% - saw a decline for the first two months of 2021 compared to a year ago.
The US Cutting Tool Market Report (CTMR) tracks orders for tooling on a similar basis and, in contrast to the machine business, this is still showing a fall in demand with orders for the first two months of 2021 -20.2% lower than in January/February 2020. It seems that the weather may have played a part in this value and it is worth noting that compared to the rest of 2020, the February 2021 market total was one of the better months. With the impact of the pandemic being felt in the US market numbers from April, we can expect the survey to show the recovery underway in a couple of months’ time.
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.
UK Profitability, 4th Quarter 2020: The Office for National Statistics (ONS) has published data for profitability of non-financial corporations for the final quarter of 2020. The net rate of return for manufacturing was 9.2% which is lower than in the 3rd period of the year (10.3%) but above either of the two readings in the first half of 2020. It is also lower than at the end of 2019 when it stood at 10.5%.
For 2020 as a whole manufacturing profitability was 8.8%; this is the lowest rate since 2010. Looking back over the data series to 1997, manufacturing profitability was in double-digits through to 2000, fell back to less than 10% between 2001 and 2012 (including a low point of 6.1% in 2009) and then was back above this psychologically important point between 2013 and 2019 with a high point of 17.3% in 2017.
The ONS Statistical Bulletin only publishes the data tables for this series and no longer has a commentary on the profitability series; you can get the data tables from their web-site at https://www.ons.gov.uk/releasecalendar (27 April) or you can request them from MTA.
Investment Grants in Scotland: The Scottish Government has closed it Regional Selective Assistance (RSA) scheme for new applications and has not yet published details of its Green Jobs Funding call - check back at https://www.scottish-enterprise.com/support-for-businesses/funding-and-grants/business-grants for more details when the scheme is launched.
We are still rounding up the reports of payments from the former RSA scheme and the editions for the 4th quarter of 2020 are available to download at https://www.scottish-enterprise.com/our-organisation/accessing-our-information or they are available on request from MTA. Although these grants cover the whole economy, you might find some new contacts among those companies who have recently received grants.