UK Manufacturing Output , December, 4th Quarter & full year 2023: The latest data on manufacturing output data from the Office for National Statistics (ONS) showed that although there was a month-on-month increase of +0.8% in both November and December, as a result of a fall of -1.3% in October and the base effects from the 3rd period of the year, the final quarter saw a quarter-on-quarter fall in production of -0.9%. However, this was still +1.6% higher than the 4th quarter of 2022 and for the year as a whole, 2023 saw manufacturing output grow by +1.3%.
Drilling down into the first level of detail, output of the capital goods industries (where most of our customers can be found) fell by -0.9% comparing the 4th and 3rd quarters of 2023 but it increased by +6.5% if we look back to the final period of 2022. Taking the year as a whole, output of the capital goods industries was +6.4% higher than in 2022.
There is a mixed short-term picture among the 4 key industries that we monitor with two – automotive (+2.8%) and metal products (+0.4%) – seeing a quarter-on-quarter rise in output in the final quarter of 2023 while production contracted in the aerospace (-0.3%) and machinery (-7.1%) industries. It is a slightly different situation if we make the comparison with the final period of 2022 where only the machinery industry (-7.4%) saw output decline and increases for the automotive (+26.0%), metal products (+11.5%) and aerospace (+5.1%) companies.
For 2023 overall, output of the automotive industry was +18.9% higher than in 2022 as it made up the ground lost due to the shortage of electronic components, with rises of +6.5% for aerospace and +3.6% for metal products; the machinery industry saw a fall of -3.8% which took the annual output index to its lowest level since 2009 (this industry grew very strongly in the immediate aftermath of the initial Covid outbreak in 2020 and actually increased output for that year as a whole).
You can download the ONS Statistical Bulletin from their web-site at https://www.ons.gov.uk/releasecalendar (15 February) 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, December, 4th Quarter and full year 2023: The main headline in the GDP data published by the ONS was, of course, that the UK is in a recession, or at least it was during the 2nd half of 2023 – the consensus of many economists is that this may already be over with a small amount of growth predicted for Q1-24.
On the face of it, the December figures were not too bad with GDP only falling by -0.1% compared to November but the surprising reduction of -0.3% for the quarter as whole came because of the downward revisions for November (+0.2% from +0.3%) and October (-0.5% from -0.3%). As this negative quarter follows the unrevised fall of -0.1% for the 3rd quarter of the year, the UK meets the threshold of two consecutive quarters of falling GDP that generates the recession headlines.
Although there have been two negative quarters for GDP growth, thanks to reasonable growth in the 1st quarter of 2023 and some base effects from the modest growth generated in 2022, last year is estimated to have seen the UK economy expand by just +0.1%.
We have already discussed the data for the manufacturing sector but we also saw both construction and services (the latter for the third quarter in a row) contract in Q4-23. Output of the construction sector was -1.3% lower than in the 3rd period of 2023 as a result of a decline of -5.0% in new work that outweighed growth of +4.0% in repair & maintenance activity. The fall in new work was particularly acute in the private housing category which has been particularly affected by higher interest rates. For 2023 as a whole, construction output is estimated to have grown by +2.0%.
For the service sector which, as noted above, has now contracted for 3 consecutive quarters, the largest contribution to the decline in the latest period came from the “wholesale & retail trade; repair of motor vehicles and motorcycles” sub-sector; more generally, retail sales fell in December 2023 at the fastest pace since January 2021 which was affected by the third Covid lockdown.
Overall, consumer-facing services fell by -0.7% in the final quarter of 2023 and this followed a reduction of -1.0% in the 3rd quarter with the largest reduction in this category coming from a seasonally adjusted -2.1% fall in food & beverage service activities which was partly off-set by an increase in accommodation services (particularly hotels). For the service sector as a whole, output in 2023 is estimated to have grown by +0.3% mainly as a result of the base effects from 2022.
There are more details in the range of ONS Statistical Bulletins which can be downloaded from their website at https://www.ons.gov.uk/releasecalendar (15 February) or on request from MTA.
UK Investment, 4th Quarter 2023: The third element of the quarterly GDP release is the data for investment in the UK economy, although we don’t get the industry level detail until the national accounts are published at the end of March.
The ONS reports that total business investment grew by +1.5% in the 4th quarter of 2023 and was +3.7% higher than a year earlier (Q4-22). For the year as a whole, business investment was +6.1% higher than in 2022, helped no doubt by the last period of the super-deduction scheme which applied for the 1st quarter of 2023.
In the absence of the industry level detail, we can get a feeling for the trends in capital expenditure relevant to our sector by looking at the breakdown by asset type; There are five categories – dwellings, transport equipment (vehicles), intellectual property products, other buildings & structures & transfer costs and ICT equipment & other machinery (ICT&OM) – and it is the last of these that is of most interest to us. In the final quarter of 2023, spending on this category of asset grew by +2.2% compared to the previous period and was +6.1% higher than a year earlier; growth for 2023 was +4.1%.
You can download the ONS Statistical Bulletin and the investment data files from their website at https://www.ons.gov.uk/releasecalendar (15 February) or request if from MTA.