UK Manufacturing Output, May 2024: Output data from the Office for National Statistics (ONS) for the manufacturing sector showed growth of +0.4% compared to April but a reduction of -0.3% when comparing the latest 3 months (March, April and May 2024) with the previous period (December 2023 and January & February 2024); looking back a year (March, April and May 2023), output of the sector increased by +0.7%.
In the monthly data, 7 of the 13 sub-sectors grew in May, led by the “manufacture of food products, beverages & tobacco” (+1.7% after a fall of -2.1% in April) and “other manufacturing and repair” (+1.6%). The largest negative contribution came from the “manufacture of transport equipment” (-0.7%).
As the monthly data can be volatile, we will concentrate on the rolling 3-month trends to ease the variations. Thanks mainly to a weak figure for March (which will drop out of the “current” period next time), output of the capital goods industries declined by -0.7% compared to the previous 3 months but grew by +3.4% against the same months in 2023. Output of this sub-sector in May 2024 was at 97.3% of its pre-pandemic level (February 2020 for the monthly data).
The automotive industry had been growing strongly, as shown by the increase in output of +14.8% in the latest 3 months (March, April & May 2024) compared to a year earlier; however, the last couple of months have been weaker and output fell by -4.3% between the latest 3 months and the previous period (December 2023, January & February 2024).
The other 3 industries that we track most closely registered an increase in output between the latest 3 months and the previous period – metal products registered growth of +1.5%, aerospace +1.4% and machinery +0.9% – and the comparison with a year ago shows trends of +9.3%, +4.0% and -8.6% respectively. The machinery industry, where output has fallen compared to a year ago, is most exposed to high interest rates and, until recently, had been on a steady downward trend since the start of 2021 (albeit with a pause in the first half of 2023).
Comparing the industries output levels with their pre-pandemic position (February 2020), only the automotive industry is positive at 110.7%; metal products is at 91.3%, machinery 83.0% and aerospace at 77.4%.
You can download the ONS Statistical Bulletin from their web-site at https://www.ons.gov.uk/releasecalendar (11 July) 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.
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UK GDP, May 2024: The ONS uses the output data to produce the monthly estimate of GDP for the UK economy. The May figures show an increase of +0.4% (compared to April which, in turn had been flat). There is some anecdotal evidence that weather-related issues (a wet April and a warm May) drove growth, in part by depressing activity in April, in sectors including construction, retail and hotels/restaurants.
Real GDP growth in the 3 months to May 2024 was +0.9% compared to the 3 months to February. Even allowing for the fact that June could be weaker, not least because of the Junior Doctors strike which will affect output of the health sector, it seems likely that growth in the 2nd quarter will be at a similar pace to the +0.7% growth in Q1-24. This would be comfortably ahead of most forecasts and, in particular, that of the Bank of England; if service sector inflation also persists, this could mean that cuts to interest rates get delayed.
In addition to the growth we saw in manufacturing, output also increased in the construction (+1.9%, reversing the fall of -1.1% in April) and services (+0.3%) sectors. Within construction, both new work (+2.7%) and repair & maintenance (+0.8%) activity increased, with new housing work and infrastructure new work making the largest contributions.
Within the service sector, 8 of the 14 sub-groups showed a month-on-month comparison; it is the 5th consecutive month of growth in this sector. The largest contribution came from an increase of +1.8% in activity in the “wholesale & retail trade; repair of motor vehicles & motorcycles” industry; there was also a positive contribution from “professional, scientific & technical activities” (mainly “scientific research & development”) and “accommodation & food service activities”. The largest negative contribution to services growth in May 2024 came from “information & communication” which was down by -1.4%, following growth of +2.8% in April 2024.
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 (11 July) or on request from MTA.
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Qimtek Contract Manufacturing Index, 2nd Quarter 2024: Qimtek operates a clearing house for contract manufacturing and their Contract Manufacturing Index (CMI) tracks the purchasing budget of companies that are looking to outsource manufacturing work. The latest data is based on work for 180 companies and 299 projects.
The results for the 2nd quarter of 2024 (April to June) showed a fall of -28% compared to the 1st period of the year (January to March), although that had been at a very good level (possibly a year-end effect) so, in part, this is just a correction in activity. There are also some comments that suggest that the General Election led to a pause on some projects, waiting to see the outcome. June was a busy month for quoting, especially in the machining category.
The index is split across three types of operations – machining, fabrication and “other”. The machining category accounted for 53% of the projects in Q2-24 but the index for this group fell by -20% compared to Q1-24 and -22% on the same period last year. Overall, the buyers of machining processes had a total outsourcing value of more than £13 million.
For fabrication, which accounted for 37% of orders in the latest quarter, the index was -43% down on the previous quarter and -27% lower than in the 2nd period of 2023 with a total outsourcing value of £9½ million. The “other” category covered the remaining 10% of projects with a value of just under £2½ million; activity in this category increased by +80% compared to the 1st quarter but was -20% down on Q2-23.
The largest industry group in the latest period was industrial machinery which accounted for 35% of the projects by value; it was followed by marine (15%), food & beverages (12%) and defence/military (11%).
You can get more details on this report from the Qimtek website at https://www.qimtek.co.uk/blog/qimtek-contract-manufacturing-index-quarter-2-2024.