European Industrial Production, October 2022: In contrast to the UK, there was a sharp fall in industrial production (IP) in October, although this was also driven by a fall in energy production thanks, in part, to relatively mild weather. There was a fall in IP of -1.9% for the EU overall, with the Euro-zone seeing a decline of -2.0% but it is worth noting that this followed a modest increase in September.
Compared to a year earlier (October 2021), total IP in the EU grew by +3.7% with an increase of +3.4% for the Euro-zone.
Looking at the detail, the capital goods sub-sector had the smallest month-on-month reduction in output in the EU (-0.6%), although it was not the “best” performing group as there was a marginal increase in activity for the non-durable consumer goods industries. The same picture is seen in the Euro-zone data where capital goods output fell by -0.6% and was only beaten by the small improvement for non-durable consumer goods.
Looking at the changes compared to a year ago, the non-durable consumer goods and capital goods groups still top the “performance” table (in this order). For the EU, output of the capital goods industries increased by +9.9%; this was beaten only by growth of +11.4% for non-durable consumer goods and all the other groups saw a fall in production. In the Euro-zone, capital goods output was +9.2% higher than a year earlier.
At the country level (and sticking with the comparison with October 2021), among the 26 Member States that have published the October figures (Cyprus is missing), total IP was higher than a year earlier in 14 countries (including Netherlands and Spain) and lower in 12 (including Germany – just – Italy and France). The largest growth was in Ireland (+53.2%), Denmark (+10.7%) and Malta (+7.2%), while the most significant reductions were in Estonia (-5.8%), Luxembourg (-3.8%) and Belgium (-2.8%).
For more details, you can download the Euro-indicators report from their website at https://ec.europa.eu/eurostat/news/euro-indicators (14 December).
Flash Purchasing Managers Index, December 2022: The flash manufacturing sector Purchasing Managers’ Index (PMI) for the UK slipped further into negative territory and, at 44.7, it is at its lowest level since May 2020 at the height of the initial pandemic lockdowns. The output element of the composite index was at its lowest for 4 months and while this was partly demand driven, the sector also continues to suffer from input shortages in some areas. There was also another substantial fall in new orders for manufacturing companies with a glimmer of good news in that the fall in export orders was less severe than in November. The fall in employment for manufacturing also accelerated to the fastest pace since October 2020.
The news for the Euro-zone is a little better, although “less bad” would be a better description as an improved reading for the manufacturing PMI has only moved it up to 47.8 which continues to indicate a contraction in activity, albeit at a slower pace. Output was negative for the 7th month running although the pace of the decline eased and was at a 6-month high. The report notes that the weakest sectors are chemicals, plastics and “basic resources” (likely to include metals); as these are the most energy intensive parts of manufacturing, this is not surprising given the high cost and tight availability of gas and, to a lesser extent, oil which are heavily used by these industries. Similarly, while the trend is still negative, the pace of decline in new orders also eased noticeably this month,
At this stage, only France and Germany have separate reports; the manufacturing PMI in both countries reflected the overall Euro-zone trend with a small improvement in the reading (to 48.9 and 47.4 respectively) while remaining in negative territory. Also, in both cases, this was driven in part by an easing in the pace of decline in output with signs that the supply chain problems are easing with a reduction in delivery times. However, new orders are also still negative in both countries, with the fall in France still running at the rapid pace we saw in November.
With the US data not out until this afternoon – too late for us to cover – the only other country to have a flash PMI is Japan. The overall manufacturing PMI edged down to 48.8, its lowest level since October 2020, although the respondents to the survey were positive about prospects for the coming year. Both output and new orders were significantly negative, although in both cases, this was at a lesser pace than in November.
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.
USMTO and CTMR, October 2022: The US Manufacturing Technology Orders (USMTO) programme tracks orders in the US market, based on the reports from participants. For the period from January to October this year, orders were just a fraction ahead of the total for the same months last year; however, the pattern is different and the full year is likely to be lower than for 2021 as last year saw exceptional figures in the last five months of the year.
Having said that, October 2022 was the 3rd best October figure ever recorded – behind only 2018 and 2021 – so it is simply a case of the market cooling moderately from an exceptional position. Although our colleagues at AMT note that demand from jobs shops eased in October, there was a dramatic increase in business from construction machinery manufacturers. There is potential boost to demand in 2023 from the ending of bonus depreciation, although this will be counter-balanced by rising interest rates.
We are still missing some of the regional data but can assess the picture using the figures for metal cutting machines – this is not too much of a problem given that this group accounts for 98% of the total orders value so far this year. The regions divide neatly into three groups with North-Central-West (-10.2%) and North-East (-7.5%) seeing modest declines, North-Central-East (+2.7%) and West (+3.0%) showing a small improvement and the South-East (+13.1%) and South-Central (+16.1%) areas growing more strongly.
The US Cutting Tool Market Report (CTMR) tracks orders for tooling on a similar basis. The latest two months have seen an acceleration in growth compared to a year earlier which means that the total for the first ten months of the year is +9.4% higher than for the same period of 2021 (January to October). We don’t usually look at the individual monthly totals but it is worth recording that October 2022 was the first month with business over $200 million since October 2019. There is no regional breakdown in the tooling data.
You can download the press releases for the two surveys from the AMT web-site at https://www.amtonline.org/topic/intelligence, with the CTMR release also published on the USCTI web-site at www.uscti.com (go to the News Releases tab); alternatively, you can request either or both releases from MTA and we can make sure you get them when they are published each month.