In the first full working week of the new year, ONS gave us some late Christmas gifts with a couple of very important releases on productivity and output production
What are the key points?
Despite the economy expanding by 0.6%, UK labour productivity decreased by 0.4% in q3 2018 compared to q2 2018. This was largely due to an increase in the actual hours worked.
GDP grew by 0.3% in November, much slower than in q3.
Services performed better than expected, expanding by 0.3%, but manufacturing contracted again after a bad performance in October.
Particularly concerning is the situation around the motor vehicle sector which was down 2.4% in the three-months to November due to Brexit, falling car sales, diesel regulations and evolving consumer demand.
How does this fit with our Annual Executive Survey?
In our latest survey, manufacturers overwhelmingly expect productivity to increase in 2019. 66% of surveyed manufacturers indicated they expect productivity to increase in 2019 while just 7% indicated they expect it to decrease in 2019.
In 2018, we published a lot about productivity and we are more than glad to see that manufacturers recognise that improving it is crucial to guaranteeing our future prosperity. You can read more here.
Productivity though is not the only theme. Indeed, manufacturers appear to be positive about most of our selected firm indicators even if they are a little bit less positive than they were a year ago.
Our respondents expect to improve their sales in the UK and also abroad – particularly in non-EU countries. However, the world has slowed down since the 2017 expansion.
Output numbers are not great and not just in the UK
As said at the start of this article, the UK economy is slowing down and this weakness seems to be detected not only on this side of the channel.
Indeed, November industrial production was down in all the four major eurozone countries - namely Germany, France, Italy, and Spain – with recent PMI data also trending in the wrong direction. Moreover, China’s numbers do not appear buoyant either.
This may create more issues for UK manufacturers who rely heavily on international markets.
Where our respondents are mostly exposed?
With signs of global slowdown more and more detectable, in this year’s Executive Survey we asked where in the world a slowdown would pose a bigger risk (we allowed two answers to be selected).
Unsurprisingly, the UK was the most selected country.
Small companies have overwhelmingly selected this option, however a slowdown in the domestic market was the top selection for every single demographic category.
On the second step of the podium is the EU, the main international partner for the UK. US came third in the global ranking with 22% of respondents selecting this option.
Despite the growing importance of the Chinese market, only 12% of manufacturers selected this option. However, it is worth pointing out that international and large companies were more prone to choosing China with results almost reaching 20% for these demographic categories.
To know more about our Executive Survey, you can find the full release here.