Today’s Index of Production release shows the manufacturing sector contracted 1.3% in October and was 2.1% lower than it was in October 2011.
Once again the headline data disappoint as these stats show the effect of the continuing challenges facing the Eurozone and the global slowdown. As our Business Trends survey showed, much of the decline in output is being driven by the Eurozone, with companies with high proportion of their exports going to the EU showing particular weakness. This month was the first time since the end of 2009 that export orders were negative and the first time since 2008 where export orders were weaker than domestic orders.
The official stats are showing a similar story to our Business Trends survey results, with strong sectoral divergence. In fact, if we look back over the course of the recovery we can see that some sectors have performed well despite the challenges facing the economy.
Index of Manufacturing, 2009=100
The transport sectors, mechanical equipment and electrical equipment are showing strong signs of growth while pharmaceuticals, chemicals, rubber and plastics and coke and refined petroleum have performed relatively poorly during the recovery.
As Lee pointed out in her blog on Monday, economic conditions will continue to challenge our manufacturers. However, there are some positive signs ahead. While the overall outlook is relatively muted, EEF’s Business Trends survey shows investment intentions remain high for the year ahead and some sectors are reasonably positive about the next three months. Our forecasts paint a continuing picture of sector divergence but with most sectors growing in 2013.