The good news for manufacturing keeps on coming

Subscribe to Campaigning blog feeds

Published

Today’s manufacturing output data gave us our first look at how the sector is performing going into the final quarter of the year…and happily it was more good news. Here are our 3 takeaways from today’s release.

 

1) Manufacturing activity confirms the momentum seen in EEF Manufacturing Outlook

Manufacturing output expanded by 0.1% month-on-month in October. While this is a fairly modest increase, looking at the 3 months to October, which gives us a clearer indication of the state of play, output was up a healthy 1.2%. And compared to the same month a year ago, the picture is even brighter, with output up 3.9%. This backs up our 2017q4 Manufacturing Outlook report, where we saw output and order balances sustained at historic highs.

October-IoP

The story behind this heathy performance is broadly the same as last month (and the month before, and before...) so apologise if this sounds a tad familiar.

The sector is continuing to benefit from the upturn in the global economy, illustrated through healthy growth figures across the eurozone, US and China. This is further backed up by last week’s PMI data, which rose to a 4 year high in the UK, as well as hitting historic highs in Germany, France, the Netherlands and so on…

This upturn, combined with the weak level of sterling is boosting demand from overseas (seen in today’s trade data with manufactured exports up nearly 10% on the year) as well as leading to a revival in business investment, supporting capital goods manufacturers. All of which is helping to offset relatively weaker demand at home.

 

2) Capital goods sectors set the pace

The sectoral picture is also a familiar one. As mentioned, capital goods continue to lead the way, benefiting from the upturn in global manufacturing activity, after a period of subdued activity. Indeed, the mechanical equipment sector and electronics sectors were up 3.4% and 2.7% respectively in the last three months. While consumer facing sectors, such as food and drink and textiles, were down 0.3% and 3.7% in the same period, as the rising inflation and weak wage dynamics play out. Once again this was reflected in Manufacturing Outlook 2017q4.

OctoberIoPsectors

 

3) Our Forecasts

Today’s latest release is another in a long line of recent data points that indicate that manufacturing is in good health, and should end the year strongly. This has led us to revise up our forecasts for 2017 to 2.1%, which if it is the case will be its strongest growth since 2014.

Looking ahead we expect manufacturing to slow, along with the whole economy next year, as Brexit uncertainty ramps up, as well as weakness in a number of sectors such as construction and automotive take effect. We therefore expect the sector to expand by 1.4% next year.

OctoberIoPforecasts

Despite the slowing, this is still growth, which is by no means always the case in manufacturing…

Author

This person has now left EEF. Please contact us on 0808 168 1874 or email us at enquiries@eef.org.uk if you have any questions.

Other articles from this author >
fact-card-thumbnail UK Manufacturing Facts, 2018/19

See our latest facts and figures on how manufacturing is contributing to the UK economy.

Read more >
industrial-strategy-has-landed Industrial Strategy

EEF has long called for the creation of an industrial strategy and now that one is here we are determined to make it a success for the sector.

Read more >
pound-coins-money-sterling-thumb
Pay increases are different by sectors but also by business areas

15 Nov 2018

Our latest Pay Bulletin is out

Online payments are not supported by your browser. Please choose an alternative browser or make payments through the 'Other payment options' on step 3.