European Commission Economic Sentiment Indicator, February 2024: The European Commission (EC) draws from a range of surveys to construct confidence indicators for five sectors of the economy and then uses these to calculate up its Economic Sentiment Indicator (ESI) which is converted to an index based on the long-run average.
The February* report shows the ESI eased down in both the EU and, to a slightly larger extent, the Euro-zone and both readings are still below the long-run average. In the EU, this move was the result of lower confidence in the services, retail trade and construction sectors, while confidence was broadly stable in industry and rose slightly among consumers.
Industry confidence was broadly stable because, while stocks of finished products were increasingly assessed as too large/above normal, this was balanced by an improvement in the expectations for output in the coming three months; the view of the current level of overall order books remained broadly stable. Two other questions are reported but not used in the calculation of confidence in the industry sector; these also painted a mixed picture with a marked improvement in the assessment of production levels over the past 3 months, while export order books were reported to have deteriorated.
Among the larger EU economies, there was a significant improvement in the ESI for the Netherlands, it was broadly stable in France and Spain but fell a little in Germany and Poland and significantly so in Italy.
As mentioned above, the ESI is calculated against the long-run average, so we can look at the position of the individual countries against their own historical situation which is the best way to compare between countries. In the latest survey, only 7 countries have an ESI above 100 – Bulgaria, Croatia, Cyprus, Greece, Poland, Romania and Spain; in addition, an improvement in Portugal put them exactly on the 100 mark but Italy dropped back out of this list. The EU candidate countries also participate in this survey and Albania, Montenegro and Serbia also have an ESI reading above their long-run average.
* Note that although dated February, the data collection period was from 1st to 22nd of that month, so the trends really refer to January and the 3-month periods ending and following this month.
You can download the EC report and statistical annex from their web-site at https://economy-finance.ec.europa.eu/economic-forecast-and-surveys/business-and-consumer-surveys/download-business-and-consumer-survey-data/press-releases_en (open the 2024 box) or you can request it from MTA.
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UK R&D Statistics, 2022: The Office for National Statistics (ONS) has published data on spending on Research and Development (R&D) in the UK for 2022. This report has been delayed because the survey has been entirely re-worked with an improved sampling framework which should give both more detail and more reliable data; however, it does mean that there is a break in the time series for most indicators apart from the headline numbers.
At the top level, there was an increase of +6.4% in R&D expenditure by UK firms in 2022 (compared to 2021) to a total of £49.9 billion. Of this, almost half (£23.7 billion or 47.5%) was carried out by the manufacturing sector; this is slightly more than for the much larger service sector (£23.1 billion or 46.3%) with the remainder in industries such as agriculture, construction and utilities.
At the level of industry groups, the largest part of this total was in the pharmaceutical industry which, on its own, accounted for more than one-sixth of the total R&D spend in 2022. In addition, the category of research & development services which accounted for a further 6.4% of the total, is also dominated by research for pharmaceuticals.
Despite this dominance, there are other areas of manufacturing that account for a significant proportion of R&D activity, including the automotive (7.6% of total R&D), aerospace (4.1%) and machinery & equipment (2.7%) industries.
Another important indicator is that £3.3 billion of total expenditure (6.7%) is in the form of capital expenditure; of this, £2.6 billion (5.3% of total R&D spending) is spent on plant & machinery with the balance on land & buildings. In the data tables which accompany the ONS Bulletin, there is breakdown by industry of the type of research and what the money is spent on (current or capital).
Finally, over half of R&D spending is concentrated in three regions of the UK – the East of England (21.4%), London (17.9%) and the South-East (17.4%).
You can download the ONS Statistical Bulletin for the National Accounts from their website at https://www.ons.gov.uk/releasecalendar (27 February) or request it from MTA.