UK Manufacturing Output , February 2022: The latest headline data for manufacturing output from the Office for National Statistics (ONS) shows a fall of -0.4% compared to January, driven mainly by a reduction of -9.4% in the automotive industry and -5.0% in the output of chemicals. Manufacturing output in February was 99.3% of its pre-pandemic level (two years ago in February 2020).
However, we prefer to track the 3-month rolling trend which shows manufacturing output in the latest 3 months (December 2021, January and February 2022) was +1.8% higher than in the previous 3 months (September, October and November 2021) and +3.8% above the same months a year ago (December 2020, January and February 2021).
The first level of detail is the sub-sector data which shows an interesting contrast; output of the capital goods industries (the most important part of manufacturing for our members) increased in the latest 3 months by +1.7% putting it in the middle of the range of the sub-sectors but compared to a year earlier it was the worst performing sub-sector with a decline of -0.6%. it is also the only sub-sector where output is below the pre-pandemic level at 89.6%.
The only bright spot among the industries that we track is metal products where output in the latest 3 months improved by +5.6% and it is +5.8% higher than a year ago; output in the latest month was 107.4% above the pre-pandemic level.
Output of the machinery industry has been all over the place in recent months and thanks to a sharp fall in the latest month (which looks to be a correction from a strong month in January) output in the latest 3 months fell by -0.9% but was still +3.4% higher than a year earlier and the current level is 101.3% of its February 2020 (pre-pandemic) total.
We see the opposite situation in the automotive industry which, as noted above, led the downturn in February 2022; despite this being the 2nd sharp monthly fall in output, thanks to a strong end to 2021 (the data is seasonally adjusted), the latest 3 month period saw a +4.1% increase in output for this industry although the level is -16.3% lower than in the equivalent 3 month period a year ago. Output in the latest month was 71.8% of its pre-pandemic level.
That just leaves us with the aerospace industry which, despite a couple of months of improvements, saw output over the latest 3 months fell by -3.4% compared to the previous 3-month period and was -5.8% lower than a year earlier. Perhaps most strikingly, output in February 2022 was only 60.6% of its pre-pandemic level reflecting the minimal recovery that this industry has seen in the UK.
You can download the ONS Statistical Bulletin from their web-site at https://www.ons.gov.uk/releasecalendar (11 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.
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UK GDP, February 2022: The manufacturing data reported above comes as part of the package of output data across the economy from which the ONS compiles the monthly GDP trends. This estimates that the UK economy grew, month-on-month, by +0.1% in February following growth of +0.8% in January.
We have already seen the weakness in the manufacturing sector and this was coupled with falls in other elements of production with mining & quarrying falling by -3.2%, electricity & gas by -0.6% and water & sewerage by -0.4%; together this meant that the wider production sector fell by -0.6% and made the largest contribution to the weakness of GDP in February.
In the other parts of the economy, the service sector grew by +0.2% and was the main driver of the overall growth with construction output falling by -0.1%. Within the service sector, the growth was mainly in tourism related sectors such as travel agencies and accommodation. Output of consumer-facing services increased by +0.7% in February while the rest of the sector saw output unchanged.
For construction, the marginal fall in output was driven by a lower level of repair & maintenance activity, with a marginal increase being recorded for new work.
The monthly measure of GDP is now +1.5% above its pre-pandemic level (February 2020), mainly as a result of the service sector which is up by +2.1% although this hides a split between consumer-facing activities which are still -5.2% below pre-Covid levels while the rest of the service sector is +4.0% above the February 2020 level. Construction is +1.1% higher than pre-pandemic levels but the broad production sector is -1.9% lower than in February 2020.
There are more details in the ONS Statistical Bulletin which can be downloaded from their website at https://www.ons.gov.uk/releasecalendar (11 April) or on request from MTA.
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Qimtek Contract Manufacturing Index, 1st Quarter 2022: Qimtek provides a sourcing platform to connect manufacturers and suppliers in the manufacturing sector; using the information that this provides, they calculate a quarterly Contract Manufacturing Index (CMI) which can also be broken down by process and industry.
The overall index fell by -20% compared to the final period of 2021, mainly because of a slow start to the year in January in all areas, with only a partial recovery in February; however, March was very strong with an overall value of 140 which is the highest monthly value for over two years. It is also worth noting that the Q1-22 value was +6% higher than for the equivalent period in 2021.
By process, the index for machining increased compared to the 4th quarter of 2021 but fell for both fabrication and “other” processes. This was the reverse of what happened in the 4th quarter where machining was down but the other two groups saw an increase. As a result of the growth at the start of this year, machining now accounts for more than half of the projects monitored and the projects in this period were valued at just over £15.8 million.
The fabrication sector declined in the 1st quarter of 2022, although it did have a strong end to the period with the March figure well above trend levels. While this group only accounted for 34% of the total number of projects in this quarter, the value was higher than for machining at nearly £17.5 million.
The “other” group, which includes processes such as casting, toolmaking, plastics & rubber and finishing only accounts for 8% of the total number of projects which makes the trends susceptible to sharp movements. The fall in the index compared to the previous quarter is entirely due to a very weak January as the other two months saw a significant improvement.
You can get more details of the latest report, including the details of the trends by customer industry which are led by the industrial machinery and electronics sectors, at https://www.qimtek.co.uk/blog/qimtek-contract-manufacturing-index-quarter-1-2022.
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European Investment & Profitability, 4th Quarter 2021: Eurostat has recently published data on profitability and investment for the Euro-zone; this shows an improvement in both cases compared to the 3rd quarter of the year.
The profit share of non-financial companies, defined as gross operating surplus divided by gross value added, improved to 40.7% which, while higher than in the previous quarter, was still below the level seen in the final period of 2020.
The gross investment rate of non-financial companies is calculated as gross fixed capital formation divided by gross value added; following the low point in the 3rd quarter, this increased to 24.0% and is also above the level recorded in the 4th period of 2020 thanks to a sharp rise in fixed capital formation and only a modest change in value added.
You can download the euro-indicators bulletin, from the Eurostat website at https://ec.europa.eu/eurostat/news/euro-indicators (05 April, under “Household saving rate”) or request it from MTA.
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CECIMO Economic & Statistical Toolbox, 4th Quarter 2021: The CECIMO Toolbox provides a round-up of data for Europe both at a macro-level and for the machine tool industry. It is based around 6 themes – historical data for the machine tool sector, demand, investment, business climate, general indicators and related (customer) sectors.
Among the highlights, CECIMO notes that:
- Industrial production in the EU is still well above its long-run average, pointing to steady growth in the sector at the end of 2021;
- Total orders across the largest countries in the CECIMO area increased by +17% compared to the 3rd quarter and were +44% higher than a year earlier;
- Production capacity utilisation in the industrial goods sector improved to stand just below the neutral position – this is its highest rating since the 2nd quarter of 2018.
You can access the CECIMO toolbox report via their website at https://www.cecimo.eu/economic-data/toolbox/ or on request from MTA.