Revisions, revisions, revisions | EEF

Revisions, revisions, revisions

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Today ONS released their third estimate of the UK's Quarterly National Accounts, which contained quite significant revisions to Manufacturing output growth and Business Investment. These revisions bring both positive and negative news.

Let's start with the good news

Manufacturing output for 2013q2 was revised up from 0.7% to 0.9%, the biggest increase in output seen for almost three years.

This was one of four upwards revisions made to the past six quarters which saw contractions in the first quarters of both 2012 and 2013 being revised away. The middle two quarters in 2012 were both revised down. Simply summing the revisions shows upwards revisions of 0.7 percentage points and downwards revisions of 0.3 percentage points over the past year and a half.

Revisions made to the last six quarters of manufacturing output% quarter on quarter change in GDP

What would these revisions mean for manufacturing growth?

With industry surveys also showing activity in the sector on the up, the prospects for the remainder of this year look better than we've seen for a number of years. Imposing these changes on our previous forecast for this year, if nothing else changed, would imply a smaller contraction of 0.2 for the manufacturing sector in 2013, up from -0.5. We still expect to see a contraction as a result of the large contraction in the sector at the end of last year.

Now for the not so good news

Business investment was revised down to a contraction of 2.7% in 2013q2, from the earlier estimate which showed growth of 1%.

This downgrade to business investment is somewhat worrying and again highlights the rebalancing challenge for the UK economy. However, if confidence is beginning to return, we should expect business investment follow. And, indeed, the number one highlight of EEF's Manufacturing Outlook was the big rebound in investment intentions by manufacturers, which saw the balance reach the second highest level seen in the history of the survey.


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