It's a fairly quiet week for official statistics this week, as we alluded to in our blog yesterday, but today saw the release of the ONS industrial production data for November 2015. A quick media search points to some disappointing data for manufacturing with headlines such as UK manufacturing sector in recession (FT); weak manufacturing data hits pound (Guardian) and pound plunges to five-year low on 'rubbish' UK manufacturing performance (Telegraph).
Wow, a rubbish performance is quite a statement .... what's going on?
The ONS release shows that:
- Total manufacturing output in November was 1.2% down on the same month a year ago. This was worse than the year on year decline seen in October, but a fall of a similar magnitude was reported earlier in the Summer.
- Fuelling the fall over the year as a whole was a massive fall in output in the machinery and equipment sector.
- Looking at the monthly data, production levels were 0.4% lower than in October - the second consecutive monthly fall following gains in August and September.
- The sector movements over the month included a reversal of the big October gains reported in the pharmaceutical sector.
No real surprises
A weak November reading for industrial production wasn't entirely unexpected. Our Manufacturing Outlook report at the end of last year had provided an early warning signal that fourth quarter activity had weakened, with sectors such as machinery and metals leading the losses - a consequence (in part) of the persistently low oil price.
But the manufacturing sectors that posted growth over the year to November, weren't surprising either - nor was the fact that there were some. Transport, chemicals, pharmaceuticals and some parts of the textiles industry all saw production levels forge ahead in 2015.
Here's a quick snapshot of the ups and downs, along with a very quick crib sheet on some of the drivers. EEF's latest Executive Survey looks at how some of these factors are expected to evolve through 2016.
Manufacturing output by sector
% change year to Nov 15 on the same period a year ago
Weak - yes, unambiguously rubbish?
The headlines referring to a sector in recession are pretty much on point, but the diversity of the UK manufacturing sector means that a closer look will also reveal some positive trends too. So I have to take issue with claims that manufacturing's performance is unambiguously rubbish (full quote behind the Telegraph headline). Not least, because the data don't support it and also because an industry that directly employs more than 2.6 million people, accounts for more than its output share of investment, innovation and exports, and is more exposed to the global risks that many economists have been pointing to so far this year than most other sectors of our economy should not be described as rubbish.