This morning has brought us a barrage of news on the UK economy and no I do not mean the apparent progress on the negotiations with the European Union. Though even if we dodge the politics it is nice to see a better phase for the UK Pound £ with it rising to above US $1.34 and 1.14 to the Euro as well as above 153 Yen. The barrage came as it is one of the theme days at the Office for National Statistics giving us an outpouring of data on the UK economy.
Let us start with a nod to my subject of Wednesday which was the automotive or car sector.
In October 2017, car production grew by 4.6% compared with September 2017 to match the record index level reached in July 2017.
If we look into the detail we see this.
Motor vehicles, trailers and semi-trailers provided a similar contribution and rose by 6.3%. An increase in export turnover of 20.7% was reported by this sub-industry compared with October 2016;
This further reinforces the view that UK car production is mostly for export as otherwise the rise in production of 4.6% in October would look very odd with the fall in registrations of 11.2% on a year on year basis. Here is the data in chart form.
A little care is needed as this is a value or turnover index and not volume so it is a little inflated but not I would suspect a lot. With the same caveat it is in fact a record.
Within the MBS production industries dataset, the value of exports for the motor vehicle, trailers and semi-trailers were at a record level in October 2017, exceeding £4 billion for the first time.
Of course single monthly data can be misleading but the news remains good if we look further back for more perspective.
Within this sector, transport equipment provided the largest contribution, rising by 2.5%, due mainly to an increase of 3.2% in motor vehicles, trailers and semi-trailers following an increase of 4.2% in the three months to September 2017. The index level for motor vehicles, trailers and semi-trailers averaged 107.1 in the three months to October 2017 due to a strong increase in exports during October 2017, compared with 103.8 in the three months to July 2017, due mainly to a weak June 2017.
If we look further back we see that vehicle production was blitzed by the credit crunch falling from 95.1 in August 2007 where 2015 = 100 to a chilling 45.6 in February 2009. It is no coincidence that the Bank of England introduced QE then when you look at that icy cold plummet. We did not reach the levels of the summer of 2007 until the spring of 2014 which makes one think. Over that period there was scope for plenty of what might come under the category of “tractor production is increasing” but it is also true that there were nearly seven lost years. Since then we have done well with both exports and home sales rising but the latter has been a smaller influence which is fortunate as it is now over!
Over the years and decades I have followed the UK economy it is not that often one can say or type that the economy is being helped by strong car production and exports.
This is also having a good phase.
The largest upward contribution came from manufacturing, which increased by 3.9%. There was broad-based strength throughout the sector, with 11 of the 13 sub-sectors increasing.
So there was a strong increase on a year ago and as well as the car sector we have already looked at we seem to have ambitions for what in the end will be the largest market of all.
Within this sub-sector, air and spacecraft and related machinery increased by 11.5%, continuing the prolonged month-on-same-month a year ago strength for this sub-industry since November 2014.
Not quite the “space aliens” that Paul Krugman once opined we needed but we seem to be doing well in the more mundane business of satellites and the like.
Just for clarity the pharmaceutical industry seems to be growing modestly as opposed to the yo-yo movements we did see and the overall picture still could do with some improvement.
manufacturing output has risen but remain below its level reached in the pre-downturn gross domestic product (GDP) peak in Quarter 1 (Jan to Mar) 2008, by 2.1% respectively in the three months to October 2017.
At least we are getting there.
Some might say that the better vehicle export data might take us from our desert of deficits in this area into an oasis. But maybe we will have to live forever to see that.
When erratic commodities are excluded, the value of the total UK trade deficit widened by £0.8 billion to £6.9 billion in the three months to October 2017.
We did export more but in a familiar pattern we imported at an even faster rate.
The widening excluding erratic commodities was due primarily to trade in goods imports increasing 2.9% (£3.3 billion) to £116.5 billion, which was offset slightly by a 0.5% (£0.2 billion) decrease in trade in services imports. Although trade in goods exports increased 1.7% (£1.4 billion) to £81.7 billion, the increase in imports was larger, therefore the total trade deficit excluding erratic commodities widened.
However if we switch to volumes maybe there is a little by little improvement.
Total goods export volumes increased 3.2% in the three months to October 2017, which was the fourth consecutive and largest increase since January 2017. Import volumes increased 0.5% over the same period.
This was driven higher by the manufacturing data.
In the three months to October 2017, the Index of Production was estimated to have increased by 1.2% compared with the three months to July 2017…….Total production output for October 2017 compared with October 2016 increased by 3.6%
The other factor pushing it up was North Sea Oil and Gas where not only less maintenance but some new oilfields opened in the summer. Thus for once we seem to have higher output with higher prices ( Brent Crude is ~ US $63 as I type this).
We also got an example of why economics is called the dismal science as most people would be pleased to have better weather and not to have to turn the heating on!
energy supply provided the largest downward contribution, decreasing by 3.3%, mainly because of unseasonably warm temperatures in October 2017,
Its effect was to subtract 0.39% from production in October meaning the monthly change was 0%.
The overall picture here lags the manufacturing one partly due to the decline of North Sea Oil.
production output has risen but remains below their level reached in the pre-downturn gross domestic product (GDP) peak in Quarter 1 (Jan to Mar) 2008, by 6.1% in the three months to October 2017.
These did fit with the view I expressed on Monday. The present seems recessionary.
Construction output contracted for the sixth consecutive period in the three-month on three-month time series, falling by 1.4% in October 2017.
The future looks brighter.
New orders saw record growth in Quarter 3 (July to September) 2017, growing by 37.4% compared with the previous quarter.The record growth was driven predominantly by growth in the infrastructure sector, caused by the awarding of several high-value new orders relating to High Speed 2 (HS2).
So a definitely maybe then especially as we note that it is for HS2 which seems so set in stone such that we will have to roll with it I guess.
In terms of official data and business surveys the UK is seeing a good period for manufacturing particularly in the vehicle sector which is pulling overall production higher. Whilst it is only 14% of our economy these days the improvement is welcome. The rise in vehicle exports has not yet been picked up by the trade figures as I note the use of the phrase “to be exported” in the production data so hopefully we will see this in the trade figures for November and December.
The trade figures have a problem as you see there is plenty of detail on the goods sector but virtually nothing on services! I have scanned it again and can only seem a mention of services imports. This is pretty woeful if you consider it is the largest sector of our economy and frankly no wonder these numbers are “not a national statistic”. It is frightening that they then go into the GDP numbers and even more frightening that we will get monthly GDP data soon.
The construction series is “not a national statistic” meaning that in this instance I have to disagree with Meatloaf about the three main series analysed today.
Now don’t be sad (Cause)
‘Cause two out of three ain’t bad