UK GDP, August 2021: After a small fall in the economy in July (the figure of -0.1% has been revised down from +0.1%), UK GDP increased by 0.4% month-on-month in August, but the economy is still -0.8% smaller than in February 2020 (the “pre-pandemic month”). The main reason why the economy is now closer to its pre-pandemic level than in previous releases (the growth in August only accounts for a small proportion of this) was improved estimates for health output and higher activity in the arts, entertainment and recreation industry which came from new VAT data.
Across the main sub-sectors, manufacturing, with growth of +0.5%, did slightly better than services which only increased by +0.3%, while construction saw a small fall of -0.2%.
The service sector is by far the largest part of the UK economy and, not surprisingly, there are a mixture of trends within the sector in the latest data. Consumer-facing services increased by +1.2% in August, mainly from an increase in food & drink service activities and a substantial rise (from a very low base) in travel agency & tour operators services. Balancing this was a fall in both retail and wholesale trade and the repair of motor vehicles. Overall in August, consumer-facing services are -4.7% below their pre-pandemic level while all other services are +0.4% above February 2020.
In construction, the fall in output was mainly in repair & maintenance activity, especially for non-housing activity (housing repair & maintenance increased), with new build work broadly flat. Construction output overall peaked at +0.9% above its pre-pandemic level in April 2021 but is now -1.5% below that level; this reflects rising input prices and the availability of key materials including steel, concrete, timber and glass.
You can get more details from the ONS Statistical Bulletins for the monthly GDP and UK Trade which can be downloaded from their web-site at https://www.ons.gov.uk/releasecalendar (13 October) or you can request them from MTA.
European Industrial Output, August 2021: The European data from Eurostat is published on a different basis as their top line measure is industrial production - while most of this is manufacturing activity, it also includes the energy sector and they don’t give a separate total for manufacturing as a whole.
Total industrial production (seasonally adjusted) fell by -1.6% compared to July in the Euro-zone and by -1.5% for the EU as a whole. Despite this, industrial production was +5.1% higher than in August 2020 for the Euro-zone and up by +5.3% for the EU.
At the sub-sector level, the month-on-month downturn was led by the capital goods industry where output fell by -3.9% in the Euro-zone and -4.0% for the EU. However, looking back to August 2020, this part of the manufacturing landscape did see some growth with output in the Euro-zone increasing by +2.8% and a rise of +2.4% for the EU - output of durable consumer goods fell in both areas compared to a year ago, while non-durable consumer goods had the strongest growth rates.
Now that we are past the worst months in 2020, we can return to looking back to 12 months ago to see the trend for the individual countries. While 22 of the 26 Member States to have published their August figures (Cyprus is the exception) saw total industrial production increase compared to this month in 2020, there were 3 - Portugal (-7.2%), Malta (-4.2%) and Czechia (-1.4%) - where output fell and it was unchanged in Italy. The strongest growth was in Belgium (+29.9%) and Ireland (+22.1%) but the size of these improvement probably only reflects a slightly different place in the recovery phase by month.
The Eurostat News Release can be downloaded from their web-site at https://ec.europa.eu/eurostat/news/news-releases (13 October) or requested from MTA.
USMTO and CTMR, August 2021: The US Manufacturing Technology Orders (USMTO) programme tracks orders in the US market, based on the reports from participants; the values and trends in the public version only cover machine tools but other technologies are part of the wider programme.
In the first 8 months of 2021, total orders are +53% higher than in the same period of 2020 (January to August). While this might not be a total surprise given the impact of the pandemic in 2020, the value of $3.55 billion is the highest total for the first 8 months of the year since 1998 which highlights the strength of the recovery in the US market although it is worth noting that this is orders and not deliveries. In addition, the total for August was the highest monthly total since September 2018 which was, of course, driven by IMTS in that month.
All of the regions show strong growth over this period with orders in the North-Central-West region more than doubling on the 2020 levels and four of the other five regions seeing an increase in the region of +50%. The “weakest” growth was in the South-East which only recorded a rise of +16% - in normal times this would be regarded as a healthy improvement in business.
The US Cutting Tool Market Report (CTMR) tracks orders for tooling on a similar basis. This side of the market has only recently started to improve and demand in the first 8 months of this year is only +7% higher than the same period in 2020 despite the low numbers recorded from April to August due to the pandemic.
If you exclude the first quarter, the growth rate for April to August between 2020 and 2021 improves to +25% - better but still below the growth rate for machinery. This hints at some of the issues that manufacturers (not just in the USA) are having in ramping up production to meet the boom in orders and is probably a better indicator of the underlying growth rate in the US market.
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.