UK Manufacturing Output , January 2022: The Office for National Statistics (ONS) published the latest output data this morning and the headline shows an increase of +0.8% in total manufacturing output compared to December 2021. However, this still leaves output of the sector -1.6% lower than its pre-pandemic level (February 2020). The monthly data can be volatile and so we prefer to use the rolling 3-month trend and this shows manufacturing output in the latest 3 months (November and December 2021 and January 2022) grew by +0.9% compared to the previous 3 months (August, September and October 2021) and by +1.6% compared to the same months a year earlier (November and December 2020 and January 2021).
The news is less positive when we drill down to some of the detail; the first level of this is to look at capital goods where most of the customers for members will be classified; here, despite month-on-month growth in January (+1.5%), this shows output falling by -0.5% comparing the latest 3 months with the previous period and by -4.7% compared to a year earlier. This is, by far, the weakest of the sub-sectors of manufacturing with the latest output figure standing at 88.9% of the pre-pandemic level.
At the industry level, the data is somewhat mixed at the moment but by far the weakest is the aerospace industry where output fell for the 5th month in a row in January and the 3-month trend showed declines of -8.2% compared to the previous 3 months and -5.4% over a year ago. Output in January 2022 was only 58.8% of its pre-pandemic level.
The other “simple” industry to explain is metal products – a significant proportion of this is the activity of sub-contractors – where output grew strongly in January (and last November) which meant an increase of +5.9% compared to the previous 3 months and +4.0% over a year earlier. This means that output was 106.4% of its level in February 2020 although this was not actually the pre-pandemic high which occurred in December 2019 – the latest output figure is above this and the highest for this industry since a spike in December 2017.
In our other key industries, the trends get more complicated. According to the ONS, which uses seasonally adjusted turnover value data for companies classified to the industry, automotive output fell sharply in January but over the latest 3 months output was still +3.2% higher than in the previous 3 month period but was -23.2% lower than a year earlier. The fall in January means that output is at only 73.6% of the pre-pandemic level (February 2020). In contrast, the unadjusted unit based data from SMMT on the production of cars and engines shows a month-on-month increase in January with the rolling 3-month trend for the former substantially higher than in the previous 3 months (thanks to a weak figure in August 2021 which will drop out next month) while engine output was broadly flat on this comparison.
The other complicated story is in the machinery industry; this is a wide ranging group of activities but the monthly output data does not have any breakdowns which would allow us to explore what is happening within the industry. Output of this industry has been on a roller-coaster ride of the past few months with large falls being recorded in October and December and increases in November and January. Output over the latest 3-month period was -3.1% lower than in the previous 3 months but +0.5% higher than a year earlier; the January 2022 output level is exactly the same as in February 2020 which is taken to be the pre-pandemic position.
You can download the ONS Statistical Bulletin from their web-site at https://www.ons.gov.uk/releasecalendar (11 March) 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, January 2022: The monthly estimate of GDP compiled by the ONS based on the output data (the full quarterly GDP series is a combination of this and estimates based on flows of both income and expenditure) shows that the economy grew by +0.8% compared to December 2021 as the restrictions started to ease following the Omicron outbreak at the end of last year. Coincidentally, this puts the economy at +0.8% above its pre-pandemic level; for the monthly series, this is taken to be February 2020.
We have discussed the manufacturing sector in the previous item but there was also month-on-month growth in the services (+0.8%) and construction (+1.1%) sectors and both of these sectors are now above their pre-pandemic levels.
There is an interesting split in the services sector which explains the monthly movements in the overall GDP data; compared to December 2021, output of consumer-facing service industries grew by +1.7%, mainly because of an increase of +6.8% in food & beverage activities, while output of other services only grew by +0.6%. However, output of the consumer-facing services is still -6.8% lower than before the pandemic while the other services group is +3.4% higher.
Another important part of the service sector is the impact of both the test & trace scheme and the vaccination programme. In January, the former increased by +20% in reaction to the Omicron wave spreading through the economy but there was a -73% fall in vaccinations as the booster programme slowed with most people having received their 3rd dose by the end of 2021.
For the construction sector, the growth in January was the 3rd consecutive month of expansion by more than +1% and the level is the highest for this sector since September 2019. This growth was driven entirely by repair & maintenance activity (+4.6%) with new work falling (-0.8%). The sector continues (or at least it did in January) to see an easing in the supply of construction products and new orders grew strongly in the 4th quarter of 2021 with all the elements of the sector above their pre-pandemic level.
There are more details in the ONS Statistical Bulletin which can be downloaded from their website at https://www.ons.gov.uk/releasecalendar (11 March) or on request from MTA.
European GDP, 4th Quarter 2021: The latest release from Eurostat confirms the previous estimates that quarter-on-quarter GDP growth in the Euro-zone was +0.3% and +0.4% for the EU overall. This gives a growth rate for 2021 as a whole of +5.3% for both the Euro-zone the EU following declines in 2020 of -6.4% and -5.9% respectively.
We now have the data for all of the EU Member States and this shows that GDP fell in the final quarter of 2021 in six countries; while this was led by Ireland (-5.4%) and Austria (-1.5%), perhaps the most significant of these is the decline of -0.3% in Germany – Croatia, Latvia and Romania (all -0.1%) were the other three.
The strongest quarterly growth rates were in Slovenia (+5.4%), Malta (+2.3%), Hungary and Spain (both +2.0%).
You can download the euro-indicators bulletin, which also has data on employment in terms of people and hours worked, from the Eurostat website at https://ec.europa.eu/eurostat/news/euro-indicators (08 March) or request it from MTA.