CBI Industrial Trends Survey, January 2023: The results from the latest CBI Industrial Trends Survey (ITS) point to output being broadly flat, following a decline in the December survey, although the reading for the latest 3 months is still slightly below the long-run average. This data was collected between 19th December and 12th January, so the monthly figures are really for December and the blocks of three months correspond to the calendar quarters.
Within the total, output over the past three months fell in 9 of the 17 sub-sectors used by the CBI; a reduction in output for the chemicals, metal manufacturing and motor vehicles & transport equipment groups was balanced by increases for the mechanical engineering (machinery) and food & drink industries. Looking forward to the 1st quarter of 2023, the respondents were optimistic for a pick up in manufacturing output with the strongest balance since this time last year (so perhaps this is new year optimism – only time will tell).
The orders picture is little better with total new orders down slightly; domestic orders were stable, but export orders declined a little. This meant that order books, both total and export, slipped back in this survey and both series are just below their long-term average. Manufacturers expect orders to rise in the 1st quarter of 2023 but despite this, the share of firms who said that orders/sales would constrain output increased to its highest level since April 2021.
This is one of the more detailed quarterly surveys which covers capacity utilisation and investment intentions. For the former of these, the percentage of companies reporting that they are operating below capacity increased in this survey to its highest level for two years but there was no change in the current rate of operation as a percentage of full capacity – at 80, this was right on the long-run average.
Investment intentions were just a little higher than in the October survey (Q3) but the 4-quarter moving average fell as they were weaker than a year ago. Having said that, the level remains well above its long-run average and certainly does not point to a recession induced fall in capital expenditure – investment intentions are often a leading indicator of recessions (but data tracking the actual spending tends to lag the cycle). Among the key user industries, investment intentions remain weak (and below average) for metal products companies, fell back but remained positive and above average for the transport equipment sub-sector and registered a healthy positive figure (again, above average) for mechanical engineering – the latter was a reversal of the October reading.
There was little change in the reasons for investment reported in this survey but there were some small but important movements in the factors that could constrain investment. Reports of both inadequate return and uncertain demand slipped from the previous survey and both were below their respective long-run averages. Labour shortages remain at an elevated level and although not given by as many respondents as the previous two factors, this is the only one that is significantly above its long-run average. There was a small increase in reports of a shortage of internal finance but not to dramatic levels and the less frequently mentioned “cost of finance” option also slipped a little so there are no real signs of finance becoming a problem.
You can get the Press Release of the CBI ITS from their web-site at www.cbi.org.uk/media-centre (24 January) or request it from MTA – we can also provide a summary of the results and some charts around the investment intentions data updating those from our Forecast Seminar.
UK Automotive Production, 2022: The Society of Motor Manufacturers & Traders (SMMT) have published the production data for December and, of course, therefore for 2022 as a whole.
The total of 775,014 cars is almost -10% lower than in 2021 with the global shortage of semi-conductor chips the main cause of this, although structural changes within the industry reflecting the closure of two volume manufacturing sites was another factor. As those supply issues ease, SMMT reference a report that estimates an increase of +15% in cars and light vehicle output in the UK in 2023, with production expected to be back above 1 million cars by 2025.
Interestingly, the export ratio for cars fell back a little to 78% in 2022 – this is its lowest rate since 2016. There was actually an increase in vehicles produced for the home market (+9%) and a decline for export (-14%). The European Union (EU) is still the largest export market and accounted for 58% of overseas deliveries in 2022; this is followed by the USA (13%) and China (9%).
Although the total number of cars manufactured fell, the number of those that are “electrified” – this term includes battery, plug-in hybrid and hybrid vehicles – increased to just over 234,000 with the share of the total tipping 30% (of units) for the first time. The share of exports is even higher with electrified vehicles accounting for nearly 45% of car exports by value in 2022.
For suppliers of manufacturing technology, the number of engines produced is, arguably, more important than vehicle numbers. This also showed a fall during 2022 with output down by -7.7% compared to 2021; this is likely to reflect the increasing share of electrified vehicles, although in this case it is only really the battery powered vehicles that matter as hybrids still have engines. There will also be an element of the supply chain problems that are affecting car production since there is no point in building engines if the vehicles can’t be completed.
Within the total, engines for the UK market declined by -5%, while exports fell by -10% which reduced the export ratio to 56% – the lowest since 2017. The annualized rate of production had been falling since a peak in May 2021 (after the main pandemic months fell out of the calculation) but this appears to have flattened out since the Spring of 2022. It remains to be seen whether the recovery in car production generates any growth for engines.
You can get more details of UK automotive production data from the SMMT press release at https://www.smmt.co.uk/category/news/manufacturing/ (there is no press release for engines but the monthly data is published at https://www.smmt.co.uk/vehicle-data/manufacturing/); alternatively, we can send members our analysis of the data – contact Geoff Noon (email [email protected]).