UK National Accounts, 3rd Quarter 2022: Just before Christmas, the Office for National Statistics (ONS) published the national accounts for the 3rd quarter; as well as a downward revision of growth for the latest period to -0.3% this also included similar revisions to the previous 4 quarters. As a result, the UK economy is now estimated to have been -0.8% smaller than its pre-Covid level (Q4-19) rather than the -0.4% before these revisions.
It seems inevitable that the UK economy will have a recession – the only question is when. With a recession being defined as two consecutive quarters of economic contraction, the figure for the 4th quarter of 2022 is key; opinions are finely balanced as to whether or not this will be negative – October showed a strong positive figure reflecting the bounce from the decline recorded in September as a result of the Queen’s funeral. If Q4 turns out positive, the recession clock gets re-set but even if we see this outcome, the first half of 2023 looks like being two negative quarters.
There have also been revisions to the data for manufacturing output although the trend of quarter-on-quarter reductions has not changed and this now runs to five consecutive periods. This means that a sector that did not have a downturn in the pandemic – manufacturing output grew by +0.1% in 2020 when the other parts of the economy turned in strong negatives – is set to see a sharp fall in 2022.
The other series where important revisions have taken place is for business investment although, disappointingly, we don’t yet have the industry level breakdown of the top level data. Total business investment is now estimated to have fallen by -2.5% compared to the 2nd quarter, rather than the more modest fall of -0.5% in the original data release. This leaves capital expenditure in Q3 still -8.1% below the pre-pandemic level. There is a little good news in the analysis of spending by asset type where there was a +1.6% quarter-on-quarter increase for “ICT & Other Machinery”, taking this category to over 30% of total business investment and generating growth of +8.5% for the rolling 4-quarter total.
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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CBI Industrial Trends Survey, December 2022: Another of the reports released just before Christmas was the results of the CBI Industrial Trends Survey (ITS) and with the data collected between 23rd November and 12th December, it really reflects the trends for November rather than the titled month.
Following the positive figure in the previous survey, manufacturing output fell in the 3-months up to this report and at the fastest pace since September 2020. Output fell in 11 of the 17 sub-sectors/industries used in the ITS with the fastest declines in food & drink, paper, printing & media and mechanical engineering (machinery).
Looking forward to the next 3 months, output is expected to fall at a rate similar to the decline seen in the previous 3 months.
Both total and export order books were reported as being “below normal”; for total order books, this was at a similar pace to the previous survey, although the balance remains above the long-run average for this measure. For export order books, however, the balance was significantly lower than in the November dated survey and was broadly in line with the long run average.
Stocks of finished goods were seen to be broadly adequate in this survey. With the balance slightly up on the previous survey but still below the long-run average.
The Press Release of the CBI ITS is available from their web-site at https://www.cbi.org.uk/media-centre/ (19 December) or on request from MTA (we can also provide a brief summary of the results).
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UK New Car Registrations, 2022: While we normally focus on production given its close relationship to demand, especially for tooling, the data on new car registrations for the year gives us some interesting insights into developments in the automotive industry.
The headline figures from the Society of Motor Manufacturers & Traders (SMMT) show that total new car registrations were -2.0% lower than in 2021 at 1,614,063 (1,647,181 the previous year) and well short of the 2.3 million cars sold in 2019 before the impact of the pandemic. They suggest that the main cause of this decline is the global parts (mainly electronics) shortages that restricted manufacturers ability to supply new cars, especially in the first half of 2022. There are signs of this unwinding in the second part of last year but not enough to outweigh the weak start.
However, the interesting data for suppliers of manufacturing technology equipment comes in the fuel mix of new vehicles which continues to move away from petro-carbons and towards electricity. While petrol powered vehicles remain the largest share of the market (42% for vehicles only powered by this fuel), there was a -10% fall in the actual number of vehicles sold. This was balanced by an increase of +40% in sales of battery electric vehicles which accounted for one in every six vehicles sold last year.
If we add in the sales of hybrid vehicles – excluding the “mild-hybrids” where the battery does little more than supplement the internal combustion engine – then this part of the market grew by +23% compared to 2021 and accounted for 34.5% (more than one-third) of total sales in 2022.
Finally, for the first time, vehicles powered only by petro-carbons (petrol + diesel) accounted for less than half of the total market, although this does mean including the mild-hybrid vehicles under “electric”.
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 2022: The latest edition of the CECIMO Toolbox was also published just before Christmas – the date refers to the fact that it mainly reflects data and information covering the 3rd quarter of 2022. The Toolbox document 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:
- Total orders for the CECIMO8 group – the major machine tool producing nations combined – was up by +3% compared to the same period in 2021.
- However, business climate indicators such as the PMI and the OECD Confidence Index generally point to a weakening situation in the coming period.
- The forecast for machine tool consumption in the CECIMO8 group of countries has been revised downward.
- Both the automotive and aerospace industries saw an improved performance in the 3rd quarter of 2022.
- Energy prices had fallen in recent months.
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) – please indicate that you are a member of MTA when requesting a copy.