Yes, we know. The UK Q1 GDP figures are horrible. But for a truly frighteningly experience we thought we would direct you specifically to the two following components: annual change in total production output, and the quarterly fall in manufacturing output.
As Reuters neatly sums up, at -12.3 percent and -6.2 per cent respectively both notch up the biggest declines since records began in 1948. So much for competitive devaluation you might say.
Graphically here’s how the decline in the manufacturing sector specifically contributed to the overall output measure making up GDP (the total figure):
It’s worth noting that the only element that actually registered any quarterly growth at all within the production element was ‘agriculture, hunting, forestry and fishing’ at +0.3 per cent. The only other output category registering growth being the ‘government and other services’ category at +0.5 per cent, as can be seen in the table below (click to enlarge):
All of which contributes to make up this delightful graphic:
And just for fun, so as to put the manufacturing decline into some longer graphical context, here’s February’s Index of Manufacturing released on April 7th, which registered a 6.5 per cent three-month decline (the overall index of production registering a 5.8 per cent three-month fall):
As the ONS explains that shows (our emphasis):
…in the three months to February, the seasonally adjusted chained volume index for the output of the production industries decreased by 5.8 per cent compared with the previous three months and was 11.1 per cent lower than the same three month period a year earlier.
In the latest three months, manufacturing output decreased by 6.5 per cent, mining and quarrying output decreased by 4.3 per cent and output of the electricity, gas and water supply industries decreased by 1.0 per cent, compared with the previous three months.
Given today’s measures that provides some optimism on March’s IoP index number. Based on the total production measure of 88.2 in today’s first quarter figures and production index measures of 88.3 and 89.2 in January and February respectively, March’s IoP figure is likely to show further declines … however, the pace of that decline may indeed be slowing.
But even if that is the case, as many economists have noted, the big surprise in today’s numbers actually came from the decline in services output — so is it the case that services are just positioning themselves to take over from manufacturing on pace of decline? As Philip Shaw from Investec Securities wrote in a note:
Services output collapsed by 1.2%, compared with last quarter’s fall of 0.8%, and against a background where surveys of the sector have chalked up a welcome improvement.
Meanwhile, Ross Walker at RBS tells Reuters (our emphasis):
It’s disappointing. The industrial production collapse was shown in the monthly numbers, so the surprise is in the service sector contraction. The consensus had been looking for a very fractional improvement there on the back of PMIs and retail sales numbers. An improvement will probably show up in the Q2 — we can be more confident that Q2 will show a less break-neck rate of contraction than Q1.
So from that weaker starting point, and given that the surveys have shown more convincing signs of stabilising, you can still be confident of a less sever decline but still pretty terrible. For 2009 there are downside risks to Darling’s 3.5 percent contraction, and increased scepticism about the public finances. But the main problem with the public finances is 2010 and 2011. Retail sales tells us that people are spending less on cars and conservatories, but the money you save on this you can spend on a lot of smaller things on the high street. In terms of Q2 GDP it gives confidence that maybe we’ve already had the worst contraction, but not the last.
Related links:
Annals of unrealistic GDP forecasts, UK edition – FT Alphaville
HMT wakes up to smell the coffee – FT Alphaville
Time to smell the coffee over at HMT - FT Alphaville
Gilt auction failure begins – FT Alphaville
Darling GDP numbers – FT Alphaville