CBI Industrial Trends Survey, February 2023: The latest results from the CBI Industrial Trends Survey saw output volumes in the latest three months* contract at their fastest pace since September 2020. A moderate increase is expected for the coming three months* although the expectations last month were more positive. Because of the use of rolling 3-month periods, it is difficult to compare the expectations with the outcome but it is worth noting that expectations in the November 2022 survey (which covered the 3-month period up to January 2023) were negative.
Output fell in 11 of the 17 sub-sectors and groups in the latest 3 months* with the fall in output largely driven by the motor vehicles & transport equipment, chemicals and paper, printing & media sectors.
Total order books were reported to be below normal in February* at a similar level to the previous survey and below the long-run average for this indicator. Export order books were also rated as “below normal” and to a greater extent than in last month’s survey – they are also quite a bit below the long-run average.
Stocks of finished goods were seen as adequate with a similar balance to the January survey. Expectations for selling price inflation over the coming 3 moths were at their lowest since May 2021 but remain significantly above average.
* Note that although this survey is dated February, the data collection took place between 26th January and 13th February so the results are likely to refer to the 3-month periods from November 2022 to January 2023 (past) and February to April 2023 (future).
You can get the Press Release of the CBI ITS from their website at www.cbi.org.uk/media-centre (21 February) or request it from MTA (we can also provide a summary of the results).
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UK Profitability, 3rd Quarter 2022: The Office for National Statistics (ONS) belatedly published the profitability data of the 3rd quarter of 2022 at the end of last week. Because of the delay, this is the first release for this series since the data revisions last Autumn so the data series have been revised right back to 1997 when the series started.
The net rate of return for manufacturing companies fell to 7.9%, having been 8.4% in Q2-22 and 8.9% in the 3rd period of 2021. Indeed, following the post-pandemic bounce in Q3-20 when manufacturing companies profitability reached 10.7%, this series has, with a couple of exceptions, been on a generally downward trend.
For manufacturing, the net rate of return is calculated as the net gain as a percentage of the capital used in production. “Capital consumed” refers to the decline in the current value of the stock of fixed assets while the operating surplus is calculated from trading profits plus income from rental of buildings, less changes in inventory value caused by price changes.
The most recent decline in profitability in the manufacturing sector has been driven by a fall in the net operating surplus but there has also been a continuous rise in net capital employed since late 2020.
As profitability is one of the key drivers for investment, we normally put this data alongside the investment data, with which it shows a reasonably close relationship; however, as we noted last week, the ONS is not currently publishing a breakdown of investment for manufacturing, so we are unable to see the impact of this fall in profitability.
You can download the ONS Statistical Bulletin and the investment data files from their website at https://www.ons.gov.uk/releasecalendar (17 February) or request if from MTA.