Boom in the gloom for capital goods

Up on the month and still down on the year. Today’s UK production figures (from the ONS) can be taken either way. Stagnation after a brief and half-hearted recovery really does seem to be the conclusion as manufacturing output has seen three month on month rises in the last six months, and three falls. Total production output has been weaker than manufacturing (two-thirds of the total) for months due to the dismal performance from the North Sea but the annual decline in May is, at least, the least negative since September last year.

UK%3A%20Index%20of%20Production from Timetric

The striking trend in the last couple of years has been the rise in the output of capital goods. The reason for this strength is not entirely clear other than to make the relative comparison, namely to point to the well-known weaknesses in consumer demand and mining (mainly North Sea oil) output. Until one of those two sectors picks up, there is little chance of a real recovery.

UK%3A%20Index%20of%20Production from Timetric

Manufatcuring output is divided into a number of components. The chart below shows the strongest and weakest of the 13 sub-sectors in the recovery phase, post-2008. Output of transport, electrical and other equipment has grown strongly while wood, computing and basic pharmaceuticals have experienced no recovery at all.

UK%3A%20Index%20of%20Production from Timetric

 

This entry was posted in Business, Economics, Industrial Production, Manufacturing, Oil production, UK. Bookmark the permalink.

One Response to Boom in the gloom for capital goods

  1. Britmouse says:

    Interesting data. It’s not entirely accurate to say that consumer demand has been weak: household consumption spending has risen 12% since 2009; what has been weak is the supply-side’s ability to provide an increase in volume of supply matching the rising demand. I posted on that data here.

    I think it makes sense to see a rise in capital investment in that context; particularly as part of the “rebalancing” project post 2008 Sterling devaluation, to provide for substitution away from (now expensive) imported goods and services.

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