Official manufacturing data points to challenges for the sector across much of Europe, with UK manufacturers failing to reverse February’s output falls in March.
A number of manufacturing production data releases from across Europe came out this morning, including detailed figures for the UK. The upshot is that the industrial sector is not exactly on clear growth path at the start of 2016 – a trend more than hinted at in recent business surveys.
Wobbly start for manufacturing across Europe
In the UK, the first estimate of 2016q1 GDP growth, signalled a contraction in manufacturing output in the first three months of the year. This was confirmed in the Index of Production release this morning. The bulk of the fall was concentrated in February, but a very small increase of 0.1% in March doesn’t offer much confidence that the sector is on the verge of a significant bounce back.
While the weak performance of most sub-sectors (more on that in a moment) is one reason for caution, the softening trend in the data across much of Europe in another. This points to manufacturers across the region up against the same challenges of subdued global growth and a recovery in Europe that still isn’t firmly rooted.
Few sectors gave a strong showing at the start of the year
Looking at the sector breakdown in the UK. EEF’s Manufacturing Outlook Survey covering the first three months of the year pointed to decelerating output losses in oil and gas exposed sectors, but stronger positive balances in some consumer facing sectors starting to tail off.
Our growth story for manufacturing at the start of the year holds – the weakness in oil and gas sectors is bottoming out and domestic consumer demand looks to have become somewhat less supportive.
The sectors with some question marks over them are those more closely tied with the construction sector. Official construction data – also the source of some controversy – were pretty grim for the first quarter, but rubber and plastics and non-metallic minerals manufacturers fared rather better over the period.
So, not too much to lift the economic spirits in the manufacturing data, but the UK is far from alone in seeing this. While there are some inevitable bright spots and some weaker trends on the consumer side that could prove temporary, our growth forecasts for manufacturing this year look to be in line for some downward revisions. We’ll be publishing these on June 7th.
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