Today's industrial production data shed a bit more sectoral light on the performance of manufacturing following the GDP release at the end of last month.
Manufacturing output growth was confirmed in the first quarter of this year with production expanding by a modest 0.1%. The good news is that this represented the eight consecutive quarter of growth for the sector - not a regular occurence, the last time this happened was between 1987q2-1989q1. The bad news is that is pace of growth has slowed markedly over the past six months and output levels are still languishing well below pre-recession levels (4.8% to be precise).
The slowdown hasn't exactly taken us by surprise. Our own Business Trends survey data has been pointing in that direction - as the chart below shows. Manufacturers' responses on output and orders have become progressively less optimistic over the course of 2014 - but have, nevertheless, remained in positive territory.
Output growth eases - on every measure
% balance of change in the past three months and % change on a year ago
Source: EEF and ONS
Ups and downs
While the overall story is still one of a sector on the up, it is never that straightforward as for every manufacturing sub-sector that expanded in the first three months of this year, there was another one (more or less) that moved in the opposite direction - see chart below.
% quarter on quarter change in output
The sectors moving on up were:
- chemicals, buoyed by lower input costs from the oil price,
- metals - mainly metal products, a diverse sector which feeds into a number of other sectors including transport equipment and construction,
- and transport sectors - both aerospace and automotive have a solid growth track record based on long order books and stronger consumer demand respectively.
Going down over the quarter were:
- rubber and plastics - coming off an exceptionally strong 2014, some moderation is to be expected but prospects still look decent given it supplies into sectors such as automotive,
- machinery - has had a torrid year due to oil and gas exploration exposure and weakening in emerging markets,
- and electronics - somewhat surprising as recent trends had been positive, but slower US growth may have had an impact.