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ECONOMIC NEWS

CBI Industrial Trends Survey, August 2021:  The latest results from the CBI Industrial Trends Survey (ITS) show that while activity remains strong in August the pace of growth in output in the 3 months to August eased from its record high level in July.  There was an increase in output in 13 of the 17 categories in the ITS with the food & drink industry the strongest (this probably reflects the re-opening of the hospitality sector).  However, the slower overall pace of growth was mainly driven by the automotive industry which saw output growth go from near record pace to flat in the face of the well-publicized supply chain issues and, it appears from the SMMT announcement (see below), staff shortages caused by the “pingdemic”.

This tallies with the flash PMI results (also see below) which also matched the ITS in reflecting a fall in the adequacy of stocks - the CBI survey notes that this is concentrated in the electronic engineering and plastic products sub-sectors.  Going back to output, the respondents to the ITS expect output over the next 3 months to pick up slightly on the pace of the past 3 months but this does represent an easing in expectations compared to the July survey.

Despite the issues with output, order books remain strong at a similar position to the previous survey and well above their long-run average level.  However, there was a weakening in export order books compared to July but this is still just above the long-run average for this series - this implies an improvement in domestic orders has balanced out the weaker position for exports.

You can get the Press Release of the CBI ITS from their web-site at www.cbi.org.uk/media-centre (23 August) or request it from MTA.

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Flash Purchasing Managers Index, August 2021:  IHS Markit who compile most of the Purchasing Managers Index (PMI) series publish a flash estimate for a limited range of countries but this does include the UK.  The overall PMI for manufacturing looks to have eased in August with a flash reading of 60.1 down from 60.4 in July and the lowest for five months.  There are a number of factors at play here;  it is inevitable that there would be an easing from the high levels we have seen through this year but we are also seeing a shift in the parts of the index calculation.  The manufacturing output element has fallen more quickly compared to last month - down to 54.1 from 57.1 in July - but orders remain strong so it appears that output is being held back;  this could lead to a pick-up in the PMI later in the year if the supply chain issues are resolved and the effects of the “pingdemic” on staff availability eases.  Having said all that, the index is still pointing to a good rate of expansion in activity in the manufacturing sector.

The flash estimate for the Euro-zone is similar with the overall manufacturing PMI easing to 61.5 (62.8 in July) and although the output element also slipped back, it was less than we saw for the UK (59.2 from 61.1 in July).  However, like the UK, orders remained buoyant, output is being constrained by supply chain problems, the overall index is boosted by the lengthening of suppliers’ delivery times and, despite all of this, it is still pointing to a significant pace of expansion in activity.

This general picture is also seen in the USA where the manufacturing PMI went from 63.4 in July to a flash estimate of 61.2 for August but with orders still at a strong pace while material shortages and pressures on capacity are holding back output.  The manufacturing PMI in Japan has never been as high as in Europe or the USA but, despite slipping from 53.0 in July to an estimate of 52.4 for August, it remains positive;  as in the other countries we have covered, this is mainly due to constraints on output from severe supply chain disruption.

The flash PMI can be downloaded from the IHS Markit web-site at https://www.markiteconomics.com/Public/Release/PressReleases;  the final figures for August will be published next week and we will bring these to you next Friday.

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UK Automotive Output, July 2021:  Data announced by the Society of Motor Manufacturers and Traders (SMMT) shows a sharp fall in the number of cars produced in the UK with a fall of -38% compared to July 2020.

While the seasonal pattern has been disrupted by the Coronavirus pandemic which meant that last July was at the heart of the recovery, the sharp fall this year has been caused by the twin effects of the shortage of electronic components (this is a global issue, not just for UK car makers) and staff shortages because employees were pinged by the Covid track & trace system.  As a result, some car manufacturers are reported to have adjusted their summer shutdowns to help manage the situation.

Exports of cars accounted for almost 85% of UK production in July but perhaps the more interesting statistics from this latest set of announcements is that just over ¼ of cars made in the UK in July were either battery electric (BEV), plug in hybrid (PHEV) or hybrid electric (HEV), the highest share on record.

There was also a sharp fall in engine output which was -27% down on a year earlier.  Interestingly, in their review of the figures, SMMT point out that this decline has been artificially inflated because a year ago output was in a process of recovering from the pandemic.  In the case of engines, the fall is mainly because fewer cars are being produced rather than a direct impact from the component supply chain and/or labour shortages.

You can get the details behind these figures from the SMMT web-site at https://www.smmt.co.uk/category/news/manufacturing/ or on request from MTA - we also have a summary of the historical data (which also includes car registrations) and can let you have that if it is useful.