CBI Industrial Trends Survey, October 2023:  The latest data from the CBI Industrial Trends Survey (ITS) showed that total new orders were flat in the three months to October*.  This was made up of a combination of a fall in domestic orders that was balanced by the strongest performance for export orders since January 2022.

However, the percentage of firms citing orders or sales as a factor likely to limit output over the next quarter ticked up from the July level (this question is only asked quarterly), to stand at its highest since January 2021.  Looking forward, manufacturers expect total orders to remain unchanged over the next three months*.

There was a fall in output volumes in the latest three months* but that the respondents expect a return to growth in the next quarter, although this expectation has been running through most of this year, so there has to be a note of caution about this optimism.  Output fell in 11 of the 17 sub-sectors in the survey, with 4 industries, including metal products and building materials, seeing the largest downturns.

The main indicator from this set of results from the ITS is the information on investment intentions from the quarter-end survey;  this updates some of the information from our Forecast Seminar last week.  The expectations for spending on plant & machinery over the coming 12 months fell again but are still above the previous low point in January 2021;  more significantly, it is now below the long-run average.

However, there is a divergence between industries and, while none of them are that good, the investment intentions for the capital goods industries were the strongest of the three economic sub-sectors and the only one that is above the long-run average.  At the industry level, although the intentions indicator fell again for transport equipment and metal products, it improved the machinery industry.

With all three of the options for the reasons for capital expenditure falling compared to the July* survey (thanks really to fewer multiple responses) there is little to note here.  However, the question about the constraints to investment are a little more helpful with an increase in companies saying that “uncertain demand” was a problem – this was at its highest since January 2021.  More significantly, reports that “cost of finance” was an issue ticked up slightly and is at its highest since July 2020 (the tail end of the initial pandemic lockdowns).  Despite this, it is worth noting that reports of a “shortage of internal finance” fell and “ability to raise external finance” remains very low.

Finally, the measure of current rate of operations as a percentage of “full capacity” fell again and is also at its lowest level since January 2021.

* Note that October is the month of publication;  with data collection taking place from 25 September to 12 October, these results really refer to September, with the three-month blocks corresponding to the calendar quarters (Q3 up to “October” and Q4 for the future).

You can view the CBI press release on these survey results on their website at https://www.cbi.org.uk/media-centre/ (24 October) 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, October 2023:  The flash manufacturing sector Purchasing Managers’ Index (PMI) published at the start of the week, while mixed, continue to show a generally weak picture for the manufacturing sector.

Although the UK figure improved again in October, at 45.2, it remains firmly in negative territory and is still below the July reading.  This less bad reading was helped by a similar improvement in the output element which contracted at a slower pace than in the previous month;  however, this was the 8th consecutive monthly fall in output which is the longest continuous period since the global financial crisis in 2008/09.

The overall flash reading for the Euro-zone edged down, although the output element was unchanged from its September level;  again, with the exception of the pandemic, the output position is at its weakest since 2009.  This is mainly driven by the fact that new orders have been falling for 18 months and the pace of decline accelerated slightly in October from the already weak level in the previous month.

The only EU countries to have separate flash reports are Germany and France and here we see slightly different trends.  It is a bit of a stretch to describe Germany as the good news story since their flash PMI for manufacturing was only 40.7, but this is the highest since May, helped by a similar improvement in the output element.  German orders also “improved” in the sense that the pace of decline was the slowest since June.

On the other hand, although the overall numbers for France are not quite as bad as in Germany – the flash manufacturing PMI for October was 42.6 – this (and the output element) is the weakest since May 2020.  Orders for French manufacturers fell at one of the steepest rates in the survey history and employment in the sector fell, albeit only marginally, for the first time in three years.

The only other countries to have a flash PMI are Japan and the USA.  For Japan, the flash reading of the manufacturing PMI was unchanged from the September figure at 48.5;  although output was a little weaker and employment fell for the first time since February 2021, this was balanced by an improvement in suppliers’ delivery times and orders falling at a slower pace.

For the USA, the PMI reading edged up to exactly he neutral position of 50.0, its highest level since April.  The output element of the calculation was in positive territory despite a slowdown in purchasing activity;  there was also a shortening of suppliers’ delivery times which helped the index up from the September reading, although reports of labour and material shortages at suppliers meant that this improvement was at the least marked improvement rate since January.

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.


UK Productivity, 2nd Quarter 2023:  The Office for National Statistics has released an updated set of data which includes the revisions to the annual National Accounts that were published at the end of September.

These now show that output per hour worked (the preferred measure of productivity) was +2.8% above the pre-pandemic levels (this is taken to be the average for 2019) in the 2nd quarter of 2023 at the whole economy level.  Compared to the 2nd quarter of 2022, output per hour worked increased by +0.3%;  this growth came because Gross Value Added (GVA) grew (+0.6%) by more than the fall in hours worked (-0.3%).

The manufacturing sector saw faster growth with productivity improving by +1.1% thanks almost entirely to an +1.2% increase in output (GVA) while hours worked edged down very slightly (-0.1%).You can get more details from the ONS Statistical Bulletin and datasets which can be downloaded from their website at https://www.ons.gov.uk/releasecalendar (24 October) or on request from MTA.

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