UK Industrial Production, November 2022: At the end of last week, just after we had to close the Friday Brief, the Office for National Statistics (ONS) published the penultimate set of data for manufacturing output for 2022 with the figures for November. The headline figure showed a fall of -0.5% compared to October but we prefer to focus on the rolling 3-month trend as it takes out some of the volatility in the monthly data, even though that is seasonally adjusted. However, this does not bring any good news as total manufacturing output in the latest 3 months (September, October and November 2022) was -1.2% lower than in the previous period (June, July and August 2022) and -6.2% down on a year earlier (September, October and November 2021). This means that manufacturing output has still not reached its pre-pandemic level (judged against February 2020 for the monthly data), as it stands at 97.4% of that level.
The news is not much better at the sub-sector level; here it is the capital goods industry that is of most interest to us and despite two consecutive months of growth in output, the rolling 3-month trend shows a fall for this group of industries of -1.0% compared to the previous period and -7.6% over a year ago. This sub-sector has also had the weakest recovery from the pandemic with output in November only 94.4% of the February 2020 level.
There is only really one piece of good news among our key industries so we will save that to end on a positive note. The weakest of these industries is metal products where output has fallen for 8 consecutive months and in the latest period is down by -5.8% compared to the previous 3 months and by -14.9% over the level of a year ago; the November figure is only 78.1% of its pre-pandemic level.
The machinery industry is not quite as bad having managed to record a positive trend in November, but output over the latest 3 months is -3.3% down on the previous block of months and -11.6% lower than a year ago; however, thanks to strong growth earlier in the recovery, output in November remains above its pre-pandemic level at 106.0%.
The aerospace industry also managed an increase in output in November which took the level to 99.1% of that in February 2020 but over the latest 3 months there was a fall of -0.8% compared to the previous period and -2.7% over the level of a year earlier.
This brings us to the automotive industry where output in the latest 3 months was +2.5% higher than in the previous 3 months thanks to growth in each of those months (with October especially strong). However, it was still -10.4% down on the same 3 months in 2021 and the November figure is only 72.7% of the pre-pandemic level; in this case, of course, this is largely the impact of shortages of components which has been restricting output and, in turn, the current improvement largely reflects the easing of those shortages.
You can download the ONS Statistical Bulletin on the Index of Production from their website at https://www.ons.gov.uk/releasecalendar (12 December) or request it from MTA; we can also share our analysis of the key industries and sub-sectors if that would be of interest.
UK GDP, November 2022: Alongside the release of the monthly output data which covers services and construction as well as manufacturing, the ONS compiles monthly GDP data based on the output methodology (full GDP figures are an amalgam of data on output, expenditure and income).
There was an upside surprise when the estimate showed month-on-month growth of +0.1% with most commentators having expected a small reduction following the strong growth in October (that in turn was a bounce back from the decline in September that was largely caused by the additional public holiday for the Queen’s funeral).
Despite the growth in October and November, in the latest 3 months, UK GDP has fallen by -0.3%. It means that it is a close call as to the direction of the economy in the 4th quarter overall but with the December figure likely to have been affected by various industrial disputes and the challenging outlook for both firms and consumers, there is still a good chance that GDP will have fallen.
Going back to the November figures, the growth was generated in the service sector where output expanded by +0.2% compared to October, with the largest contributions coming from administrative & support services and information & communication. However, perhaps the most interesting thing in this part of the data release was the growth of +0.4% in consumer-facing services, with the ONS suggesting that this was led by food & beverage service activities as the football World Cup, despite the fact that this only started on the 20th of the month. Indeed, they also noted that the largest negative contribution to consumer-facing services came from sports activities, amusement & recreation because fewer football matches took place in the UK because of the World Cup.
We have already discussed the manufacturing sector, so that just leaves construction where output overall was unchanged from the October figure in volume terms. This is a combination of a fall in new work (-0.4%) and a rise in repair & maintenance activity (+0.6%), although even this hides divergence within these two parts of the sector. Infrastructure new work and non-housing repair & maintenance both increased while the main negative contributions came from private housing where both new work and repair & maintenance activity fell.
You can download the ONS Statistical Bulletin on the monthly GDP figures from their website at https://www.ons.gov.uk/releasecalendar (13 January) or request it from MTA