UK Manufacturing Output , February 2023: Data published by the Office for National Statistics (ONS) shows that manufacturing output was unchanged from the January level, with 7 of the 13 sub-sectors seeing output decline in February. These were led by the chemicals group with machinery also seeing a decline; however, one of the strongest growing groups was transport equipment and we will come back to this later in this note.
We prefer to focus on the rolling 3-month trends as this removes some of the volatility in the monthly data; UK manufacturing output in the latest 3 months (December 2022, January and February 2023) was +0.1% higher than in the previous three months (September, October and November 2022) but -2.9% lower than the same period a year ago (December 2021, January and February 2022). The output level in February was 99.9% of its pre-pandemic level (this is taken to be February 2020 for the monthly series).
At the sub-sector level, output of the capital goods industries increased by +1.6% compared to the previous 3 months – this was the only one of the sub-sectors of manufacturing to have a positive trend on this measure. Compared to the same period a year earlier, capital goods output fell by -1.0% and the February level was 98.7% of its pre-pandemic position – on the latter measure, this is the weakest of the sub-sectors.
Returning to the individual industries, all our key industries saw output increase in the latest 3 months; the strongest of these was automotive where output was +2.9% higher than in the previous 3 months but it fell by -3.0% compared to the level of the same months a year earlier. Also, automotive remains the furthest from recovering with output in February only 73.5% of the post-pandemic level – indeed, it is not yet back to a plateau level that it reached after the first impact of supply chain shortages in the 2nd half of 2021.
The next strongest growth in the short-term came from the machinery industry where output in the latest 3 months was +1.1% higher than in the previous period but it was -5.6% lower than a year ago. This latter trend reflects the end of a period of growth which means that the latest output figure is 107.8% of that achieved immediately before the pandemic – the highest of our key industries.
The other industry where output is above its pre-pandemic level in February 2023 is aerospace but only just at 100.3%. This is generated by an increase in output of +0.7% in the latest 3 months compared to the previous period; this industry has taken a long time to start its post-pandemic recovery and, as a result, output in the latest 3 months was +2.1% higher than a year ago – the only one of our key industries with a plus sign on this measure.
Finally, output of the metal products industry (which includes sub-contract machining by both cutting and forming) grew by +0.3% in the latest 3 months but it was -8.0% lower than a year earlier and the latest output reading is only 85.0% of its pre-pandemic level.
You can download the ONS Statistical Bulletin from their web-site at https://www.ons.gov.uk/releasecalendar (13 April) or request it from MTA; we also have an analysis of the key industries which is available to members – please contact Geoff Noon ([email protected]) if you would like these charts.
UK GDP, February 2023: The ONS estimate of GDP for February that is derived from the output data was, at first glance, slightly disappointing with the headline figure showing no change on the January level. However, thanks to revisions to earlier months going back to the start of 2022, including an upward revision to both December 2022 and January 2023, the overall level of GDP in February was broadly where it had been expected to be.
This can also be seen in the rolling 3-month averages with each of the last three months showing a positive trend – in the 3 months to February, UK GDP was +0.1% higher than in the previous 3 months.
Turning to the sectors of the economy, we have already covered the manufacturing sector which was in line with the overall average. There was a slight reduction in activity in the service sector (-0.1%) which followed strong growth in January (+0.7%) and, as we saw in the manufacturing data, there was a wide spread of trends in the various elements of this sector. In the latest 3 months, service sector output was +0.1% higher than in the previous block.
The largest negative contribution came from education which fell by -1.7% in the month because of strikes by teachers, with public administration also seeing a fall in output thanks to industrial action in the civil service. The most positive impact on the February data came from human health activities which grew by +0.5% in February and this mainly reflects a recovery following industrial action in January.
There is an interesting contrast within the services sector where consumer facing services output grew by +0.4% in February but is still -8.9% below its pre-pandemic level (February 2020), while other services output fell but is still +2.2% above where it was 3 years ago.
The small fall in the service sector was balanced by an increase in output from construction of +2.4% in volume terms; this more than recovers the -1.7% fall in January which was largely due to bad weather, even after allowing for the seasonal adjustment. Within the sector, 8 of the 9 sub-groups saw activity improve in February but the strongest growth was in repair & maintenance activities. Overall, construction output in the latest 3 months was +0.9% higher than in the previous 3 months.
There are more details in the range of ONS Statistical Bulletins which can be downloaded from their website at https://www.ons.gov.uk/releasecalendar (13 April) or on request from MTA.
European Industrial Production, February 2023: Eurostat has also published the output data for February this week, although the aggregate they quote is for Industrial Production (IP) – while this is dominated by manufacturing, it also includes energy and utilities (but not construction). The headline here shows increases in total IP of +1.4% in the EU and +1.5% for the Euro-zone when comparing February with January; looking back a year to February 2022 and the latest figures represent growth of +2.1% and +2.0% respectively.
There is an interesting divergence between the EU and Euro-zone trends in the month-on-month data; for the EU, the fastest growth was in non-durable consumer goods (things like food) at +2.4% with capital goods output rising by +2.1%, while in the Euro-zone it was capital goods output which had the strongest growth at +2.2% – non-durable goods expanded by +1.9% here. Looking back over 12 months, capital goods output led the way with growth of +10.3% in the EU and +10.4% in the Euro-zone.
Continuing with the 12-month comparison, of the 26 Member States who have published the data (Cyprus is missing as usual), output increased in 11 and fell in 15 – this is a modest improvement on the 9 and 17 respectively in January. The fastest growth was in Ireland (+25.3%), Malta (+17.1%) and Denmark (+15.7%) while the largest reductions were in Estonia (-7.4%) and Lithuania (-6.9%). Among the largest EU economies, France (+1.2%) and Germany (+0.5%) had higher output than a year earlier, while Italy (-2.3%) and Spain (-0.9%) recorded a fall.
You can get the full details from the Eurostat News Release which can be downloaded from their website at https://ec.europa.eu/eurostat/news/euro-indicators (13 April) or requested from MTA.