UK National Accounts, 3rd Quarter 2021: Just before Christmas, the Office for National Statistics (ONS) published the national accounts for the 3rd quarter of 2020. At the whole economy level, the main interest in this is the revisions to the GDP data back to the start of 2020 which has meant an upward adjustment to the estimate for economic growth in 2020 to -9.4% (it was previously put at -9.7%).
The ONS does not go into detail about these revisions other than to note that it was related to balancing against a number of annual benchmark data sets and the use of VAT data up to the 2nd quarter of 2021 to estimate the output of some small businesses. Within these revisions, manufacturing output is now estimated to have fallen by -9.0% (revised down from -8.8%) in 2020, with construction falling by -16.0% and services by -8.8%.
Turning to the quarterly data, the latest estimates for economic growth show a downward revision from the +1.3% in the previous release to a new figure of +1.1%. As a result of the upward revisions to the 2020 data, the economy is now 1.5% smaller than its pre-pandemic level (taken to be the 4th period of 2019 in the quarterly data). The main contributions to growth in the 3rd quarter were from the service sector, led by hospitality and arts, entertainment & recreation with the continued easing of restrictions in these areas – the impact of the Omicron variant will inevitably lead to a slow down in these areas in the 4th quarter.
Manufacturing output is estimated to have fallen by -0.7% in the 3rd quarter and activity in the construction sector fell by -1.0% quarter-on-quarter but, as mentioned above, service sector output grew by +1.4%. Most of the decline in the manufacturing sector is put down to a fall in the output of the manufacture of rubber & plastic products, although there was a fall in output for 8 of the 13 sub-sectors covered by the ONS report.
You can download the ONS Statistical Bulletin for the National Accounts from their web-site at https://www.ons.gov.uk/releasecalendar (22 December) or request it from MTA.
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UK Investment, 3rd Quarter 2021: The latest investment data, published as part of the National Accounts, is a revision of what was published six weeks earlier and now shows a quarter-on-quarter fall in total business investment of -2.5% (first estimate was growth of +0.4%) although it is +2.6% (+0.8%) higher than a year earlier. Analysis of this high level data by type of asset shows the category covering “ICT & Other Machinery” is now estimated at +5.2% (+7.3%) higher than in the previous quarter but thanks to revisions to the data back to the start of 2020, the growth rate compared to a year earlier is now put at +20.6% (+13.6%).
There is some interesting initial analysis in this bulletin which attempts to measure the impact of the super-deduction allowance that was announced in the budget and came into effect from 1st April (the start of the 2nd quarter of the year). The ONS suggests that the impact of this is likely to be felt most in the “ICT & Other Machinery” category noted above and goes on to point out that this has increased in each of the past two quarters. Indeed, in the latest period, this category accounted for almost 33% of total business investment, the highest share since the 2nd quarter of 2014.
This means that this category is now the largest of the asset groups within total business investment although it is, of course, too early to see this as definitive evidence of the impact of the super-deduction allowance. Survey evidence, both from the ONS and other organisations, has not reported this measure as a driver of investment decisions. It is also worth noting that the ICT & Other Machinery category was the largest of the asset types through most of 2018 and 2019. Another factor is that spending on vehicles by businesses has been restricted by the supply chain problems in the automotive industry which has the effect of reducing the share of investment in this category.
The revised investment data (seasonally adjusted) by industry shows total manufacturing spending falling by -0.6% compared to Q2-21 but it is +12.1% higher than a year earlier (Q3-20); the equivalent trends for the engineering & vehicles sub-group were +0.3% and +8.8% respectively.
You can download the ONS Statistical Bulletin for Business Investment from their web-site at https://www.ons.gov.uk/releasecalendar (22 December) or request it from MTA.
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CBI Industrial Trends Survey, December 2021: The results of the CBI Industrial Trends survey were published just before the holidays; with the data collected between 22nd November and 10th December, it really reflects the trends for November rather than the titled month. It is also comes before the Omicron variant would have had much impact on demand.
Output volumes in the three months to “December” grew at their fastest pace since July and this was reflected across most of the sectors, led by food & drink and the automotive & other transport groups. Looking forward to the next three months, although the respondents expect a slower rate of growth than in the past 3 months, it is still at a healthy pace.
The measure of total orders books – the percentage balance when compared to “normal” – was just a fraction off the previous surveys record high, indicating that demand remains strong. Export orders also eased from the previous month and although they are inline with “normal” levels the balance is well above the long-run average.
Manufacturers inventory positions – the stock adequacy of finished goods – worsened again in the latest survey and are now at a new all-time record low. Price pressures are anticipated to remain acute over the next three months.
The Press Release of the CBI ITS is available from their web-site at https://www.cbi.org.uk/media-centre/ (20 December) or on request from MTA (we can also provide a brief summary of the results).
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UK New Car Registrations, 2021: We don’t normally report on car registrations as it has little bearing on demand for manufacturing technology equipment and services; however, the annual data does give some interesting pointers to how the automotive market is migrating from carbon based fuels to various forms of electric power.
The Society of Motor Manufacturers & Traders (SMMT) reports that total new car registrations increased by just +1% compared to 2020 to stand at 1,647,181 and still a long way short of the 2.3 million cars sold in 2019 before the impact of Covid and supply chain issues over the past couple of years.
During 2021, the share of the market taken by petrol only fueled cars fell below 50% and diesel only vehicles accounted for less than 10% of the market. However, there was a sharp increase in mild-hybrid vehicles – these are vehicles where the internal combustion (IC) engine still does most of the work with only supplementary power from a battery – so the overall number of vehicles powered by IC engines fell from 82.5% in 2020 to 72.5% in 2021.
This does, however, mean that electric vehicles accounted for 27.5% of the UK car market in 2021; in 2019 this share was 7.4% and it increased in 2020 to 17.5%. For 2021, battery only vehicles took 11% of the total UK market, plug-in hybrids accounted for 7% and other hybrids (vehicles where the battery provides the motive power with an IC engine for charging but no facility to plug it in) for 9%.
You can get the data from SMMT at https://www.smmt.co.uk/category/news/registrations/ or we can send you a summary files with the various calculations – contact Geoff Noon at MTA ([email protected]) for this excel file.
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CECIMO Economic & Statistical Toolbox, 3rd Quarter 2021: The latest edition of the CECIMO Toolbox was published just before Christmas – it mainly reflects data and information covering the 3rd quarter of 2021. The Toolbox groups information into 6 categories covering historical data for the sector, demand, investment, the business climate, general economic indicators and information on related sectors.
The highlights of this report include:
- European Industrial Production reflects a steady recovery in activity.
- The OECD Business Confidence Index for Europe reached an all-time high
- Production of machine tools in the 15 CECIMO countries is expected to grow by +11.5% in 2021 to over €22.5 billion.
- New orders for machine tool manufacturers improved compared to a year earlier, although looking quarter-on-quarter, there was a fall, mainly in domestic orders.
You can download the Toolbox from the CECIMO website at https://www.cecimo.eu/economic-data/toolbox/ (unfortunately, the file is too large to attach to this report).