UK Manufacturing Output, 2nd Quarter 2021: Data from the Office for National Statistics (ONS) showed that manufacturing output was +0.2% higher in June than in the previous month, with the 2nd quarter showing an improvement of +1.7% compared to the 1st period of the year. However, output in the sector is still only at 98.0% of the pre-pandemic level - using the quarterly data which we will in most of this note, this is comparing the latest figures with the level of output in the 4th quarter of 2019 (on a monthly basis, the pre-pandemic data point is for February 2020). We won’t look at the trend compared with the same period a year earlier as the 2nd quarter of 2020 was the worst affected in the initial Covid-19 outbreak so the growth rates, while impressive, are meaningless.
The first level of detail is the sub-sector breakdown with capital goods the key element for our industry. This saw a quarter-on-quarter fall in output of -0.4% with the level only 90.3% of that reached pre-pandemic. None of the other sub-sectors of manufacturing saw output fall in Q2-21, although there was a fall in the energy sub-sector despite the seasonal adjustment of the data (note that energy is part of production but not manufacturing).
At the industry level there is a mixture of trends and we will begin with the bad news. Output of the automotive industry fell by -16.7% compared to Q1-21 and was only just over 75% of the pre-pandemic level. As well as the ONS data which is based on turnover of companies classified to the industry, we also have figures from the SMMT on the number of cars and engines produced. Comparing the 2nd quarter of 2021 with the 1st period of the year, car output fell by -37% and engine output by -24%. However, while part of this is the impact of the ”pingdemic” (especially for June), this industry has been hit the hardest by the global shortage of electronic components and this is the main reason why output levels have fallen back in the latest quarter. It is also worth noting that while there would have been some run-down in output at Honda, the impact of the closure of their factory is not yet in these figures as it was the end of July when production ended.
The other weak industry is aerospace where output only grew by +0.2% in the 2nd quarter and stands at 65.3% of the pre-pandemic level. There was a modest initial bounce in the 3rd quarter of 2020 but since then output in this industry has slipped back and is only 8.5% higher than at the bottom of the trough a year ago.
That leaves two other industries where the news is rather better. Output of the metal products industry (a significant proportion of which is sub-contract manufacturing activity) was +4.2% higher than in the previous quarter to stand at 99.3% of the pre-pandemic level. There is even better news for the machinery industry with output growth of +7.6% taking the level above that we saw before the pandemic struck (101.0%). The only other engineering industry to have output above the pre-pandemic level is electrical engineering (105.1%).
You can download the ONS Statistical Bulletin from their web-site at https://www.ons.gov.uk/releasecalendar (12 August) or request it from MTA; we also have an analysis of the key industries which is available to members - please contact Geoff Noon (firstname.lastname@example.org) if you would like these charts.
UK GDP, June and 2nd Quarter 2021: The monthly GDP data compiled by the ONS is based on the output figures so this is also the source for the first estimate of GDP for the 2nd quarter, although there are some provisional figures from the expenditure and income data streams. The headlines show quarter-on-quarter growth of +4.8% as a result of the easing of coronavirus restrictions but this still leaves the economy -4.4% lower than the pre-pandemic level in the final quarter of 2019.
Again we will focus on the quarterly data but it is worth noting that the growth of +1.0% in June was the 5th successive month of growth. Health activities made the largest contribution as visits to GPs increased, while the hospitality industry benefitted from its first full month of indoor dining (these restrictions were lifted on 17th May in England). On the other hand, the construction sector contracted for the 3rd consecutive month with some companies reporting a shortage of materials.
Returning to the quarterly trends, we have already seen growth of +1.7% in the manufacturing sector but this was the slowest rate of the main sectors of the economy. Despite the month-on-month falls noted above, the construction sector grew by +3.3% for the quarter as a whole and services output increased by +5.7%.
In the quarterly data, wholesale & retail trade, accommodation & food services and education made the largest contributions to growth in services output. The first two of these industry groups benefitted from the re-opening of indoor hospitality and non-essential retail along with the impact of the Euro 2020 tournament. The re-opening of schools over the quarter led to a rise of in-school attendance rates.
In the interests of remaining “brief”, we will postpone our analysis of the trade and investment data which was also part of this release to next week but in the meantime you can get more details from the ONS Statistical Bulletins for the monthly and quarterly GDP which are available from their web-site at https://www.ons.gov.uk/releasecalendar (12 August) or you can request them from MTA.
European Industrial Output, June 2021: The data published by Eurostat covers industrial production and there is no breakdown to identify the manufacturing output data to match that for the UK - manufacturing makes up the majority of industrial production but also includes the activity of the energy, extraction and utilities industries. They also only publish monthly data so this piece will focus on the figures for June.
Total industrial production in the EU was -0.2% lower than in May with a fall of -0.3% for the Euro-zone. In both cases this is the 2nd consecutive monthly reduction in industrial production and it extends the gap between the two series; therefore, while the EU output level is at its lowest since February 2021, for the Euro-zone it is the lowest since October 2020. As a result, while output in the EU is +10.5% higher than a year ago (June 2020), for the Euro-zone it is only +9.7% higher.
Looking in more detail, the capital goods industry was the main culprit for the fall in industrial production with month-on-month reductions of -1.5% in the Euro-zone and -1.2% for the EU. This means that compared with June 2020, the capital goods industry has the smallest increase in output among the manufacturing sub-sectors (the energy sub-sector grew more slowly but is the difference between industrial production and manufacturing output) at +8.1% for the EU and +6.3% for the Euro-zone.
Looking back over 12 months it is inevitable that all of the Member States have seen an increase in industrial production but there is some more interest in using the month-on-month data. Of the 26 Member States (Cyprus is the exception) to have published figures for June, 15 saw total industrial production higher than in May and the other 11 were lower. The largest increases were in Malta (+5.2%), Netherlands (+3.3%) and Estonia (+3.2%) while Ireland (-4.4%), Portugal (-2.6%) and Denmark (-2.3%) saw the greatest reductions.
The Eurostat euro-indicators report can be downloaded from their web-site at https://ec.europa.eu/eurostat/news/news-releases (12 August) or requested from MTA.