European Commission Economic Sentiment Indicator, September 2022: The European Commission (EC) draws from a range of surveys to construct confidence indicators for six sectors of the economy and then uses five of these (financial services is not part of the calculation) to make up its Economic Sentiment Indicator (ESI).
After the more moderate fall in the ESI in the August dated survey, there was another sharp reduction in the new data published this week at a pace similar to that recorded in the “July” survey – see below for a note on dates. This fall in the ESI was spread across all five of the sectors included in the calculation and financial services also recorded a significant drop in confidence.
For the industry sector, this was the 7th consecutive month in which confidence has fallen but it does remain a little above its long-term average level – it shares this only with construction, while consumer confidence has collapsed and is now below the levels reached during both the Euro-zone crisis (2012) and the Covid pandemic (2020) with a new all-time low being recorded.
Looking in more detail at the industry sector, the survey respondents expectations for production over the coming 3 months fell sharply, as did assessments of the current level of orders books while stocks of finished goods edged down after several months of recovery. Although not included in the calculation of confidence, export order books were lower in this survey but there is a glimmer of good news with managers’ saying that output over the previous 3 months (see below) had improved slightly.
The ESI fell in all of the six largest EU economies with Germany seeing the biggest reduction, Italy, Netherlands and France having a significant fall, a moderate decline in Poland and Spain with the smallest (but still notable) decrease.
The ESI is calculated against its long-run average so another way of assessing the relative position of the various countries is to see whether the ESI is above or below 100. Among the EU member states, only Greece, Croatia, Cyprus, Portugal and Romania have a reading above 100 and they are joined in this by North Macedonia and Albania among the EU candidate countries who are also part of this survey.
Finally you should note that the current survey, although dated and described as “September” really refers to trends for August; with data collection taking place between the 1st and 26th of September, the views on questions such as output over the previous 3 months would really cover the period to August (June, July and August). We have kept the references to months as published by the EC but you should really read these as one month earlier than quoted.
You can download the EC report and statistical annex from their web-site at https://ec.europa.eu/info/business-economy-euro/indicators-statistics/ec… or you can request it from MTA.
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UK Trade by Industry, 2nd Quarter 2022: The Office for National Statistics recently published an analysis of the trade (export/import) data by industry. While we normally talk about our 4 key end-user industries – aerospace, automotive, machinery and metal products – on this occasion we will also include the electrical, electronics and instrument industries in a wider definition of what we will call Engineering in this note.
The headline figures show that total manufacturing exports increased by +12% compared to the 1st period of this year and by +11% compared to a year earlier; this meant that the rolling 4-quarter total – effectively the annualized rate – showed an increase of +9% for manufacturing as a whole. On the same basis, imports of manufactured products increased by +3% quarter-on-quarter, +31% over a year earlier (thanks to a big leap in the 1st quarter of 2022) and +13% for the annualized trend.
For Engineering, we see a more modest improvement for exports with growth rates of +8% compared to the 1st quarter, +7% over a year ago and +4% for the rolling 4-quarter total. It is similar for imports except that the quarter-on-quarter total was better than for manufacturing as a whole at +5%, although growth compared to Q2-21 was “only” +23% and the annualized rate showed an increase of +9%.
In the 2nd quarter of 2022, exports of Engineering goods accounted for 47% of all manufactured products, while for imports the ratio was 43%. This emphasizes the importance of the Engineering industries to the UK trade position but we still have a deficit for the sub-sector as a whole and for most of the individual industries.
The UK’s trade deficit in manufactured goods in the 2nd quarter of 2022 was £51.5 billion, of which the Engineering industries accounted for £18.9 billion (37%). The only industry with a trade surplus was “other transport equipment” at £2.4 billion, thanks entirely to the aerospace industry which makes up most of the wider group and had a trade surplus for the quarter of £2.6 billion.
The largest deficit was in the automotive industry (£7.3 billion) followed by “computer, electronic & optical (instrumentation) products” (£6.3 billion); more modest deficits were recorded for the metal products (£2.1 billion) and machinery (£1.6 billion) industries.
Finally, for machine tools, our initial analysis of the data shows that exports in the 2nd quarter were worth £127.5 million with a total of £259.4 million for the first half of the year; the latter figure is just +0.1% ahead of the total for the same months of 2021. Within this, exports to the European Union in the first half of the year grew by +18% with a fall of -14% for the rest of the world – the latter was mainly reductions in shipments to the USA (-24%) and China (-47%).
The import position is rather different; machine tool imports in the 2nd quarter were high by historical standards at £157.3 million but thanks mainly to an exceptional Q1, the half year total is £363.7 million. This is the best first half since 1998 and represents a growth rate of +53% compared to H1-2021. We think that part of the explanation lies in the changes to the methodology for collecting trade data vis-à-vis the European Union as a result of Brexit and this is supported by the fact that arrivals from the EU grew by+87% compared to the first half of 2021, while imports from the rest of the world only grew by +26%. In terms of import sources, the only one to have a negative trend is the USA with a fall of -23%.
The data tables are available on the ONS web-site at https://www.ons.gov.uk/releasecalendar (15 September) but you can request the version that we have amended to generate this article – if you would like this, please contact Geoff Noon at MTA (email: [email protected]).