Today brings us the latest official data on the UK economy as the monthly GDP number for November is announced. It comes from a weak international backdrop as we have been observing as Germany and France have already released weak numbers for that time period.

In November 2018, production in industry was down by 1.9% from the previous month on a price, seasonally and calendar adjusted basis ( Germany). In November 2018, output slipped back sharply in the manufacturing industry (−1.4% after +1.4% in October) as well as in the
whole industry (−1.3% after +1.3%)….Manufacturing output went down over the last three months (−1.0%), as well as in the whole industry (−0.9%).  ( France )

Just to add to the party this has just been released.

Italian Industrial Production (M/M) Nov: -1.60% (est -0.30% ; prev -0.10%) Italian Industrial Production WDA (Y/Y) Nov: -2.60% (est 0.40% ; prev 1.00%) (@LiveSquawk )

So the background is rather grim as the pattern for 2018 had been for a nudge higher in industrial production which is now replaced by a 2.6% year on year fall. Even a country which has been doing well like Spain has also reported a 1.5% monthly fall.

UK Production

In the circumstances described above the first response to the UK data was one of relief.

In November 2018, total production output fell by 0.4%, compared with October 2018, due to a fall of 0.3% in manufacturing, supported by falls of 1.1% electricity and gas and 1.3% in mining and quarrying. The monthly decrease in manufacturing output of 0.3% was due to 8 of the 13 sub-sectors falling; the largest downward contribution came from basic metals and metal products, falling by 3.6%.

Obviously one does not welcome falls but in relative terms those were good numbers. I have no idea how the consensus forecast was for a rise as you would need to be locked in a dark internet free cellar to think that in my opinion. However if we look for some perspective we have not escaped the global trend in this area.

In the three months to November 2018, total production output decreased by 0.9% compared with the same three months to November 2017; this is the weakest growth in total production output since November 2012 and the first time since October 2012 there has been widespread weakness across all four sectors.

If we go back to yesterday these numbers take us back to a period when the UK establishment changed tack in terms of economic policy. For example the Bank of England produced some credit easing via the Term Funding Scheme which reduced mortgage rates quite quickly by 1% and the government loosened the fiscal purse strings. Yet we are supposed to believe that the Bank of England currently plans to increase interest-rates.

If we look for causes one has become rather familiar and seems set to stay for a bit.

Providing the largest downward contribution was transport equipment, which fell by 1.1% due to a fall of 2.4% in motor vehicles, trailers and semi-trailers. The weakness was driven by the impact of shutdowns within this industry in October 2018 in addition to reduced production in November 2018.

Another factor has been the mild winter which has reduced electricity and gas output. In many ways this is a good thing as lower demand means that restrictions are unlikely but it reduces the output numbers. This also is something which has continued up until now.

There remains a chilling kicker to all of this, however. If this is another cyclical downturn then it will be from a level well below the previous peak or we are in the lost decade zone.

Production and manufacturing output have risen since then but remain 6.5% and 2.0% lower, respectively, in the three months to November 2018 than the pre-downturn gross domestic product (GDP) peak in Quarter 1 (Jan to Mar) 2008.

UK GDP

The headline was good.

Monthly gross domestic product (GDP) growth was 0.2% in November 2018, following flat growth in September 2018 and growth of 0.1% in October 2018.

Actually I doubt anyone really believes that UK economic growth has been picking up over this period as we get a real life demonstration of why the numbers are a bad idea. They are simply too erratic. If we look deeper we get a better idea of the trajectory from this.

UK gross domestic product (GDP) grew by 0.3% in the three months to November 2018.

This gives us two themes of which the first is that in international terms with many of the main European economies flirting with recession that is a good performance. It is also true that we have not escaped the chill winds as growth has slowed since the summer. I spotted an interesting perspective the other day which suggested that the boom in areas like cars had the UK at a relative disadvantage to places like Germany and we may now be in a phase where the UK is stronger but that remains to be seen.

As so often the growth mostly came from the services sector.

The services sector rolling three-month growth to November 2018 was 0.3%. Professional and scientific activities was the largest contributor, with a contribution of 0.14 percentage points to gross domestic product (GDP) growth. Other notable contributors were information and communication, and human health activities.

Tucked away in there may be another good effort by the UK film industry so whilst “luvvies” may be annoying please be nice to them as they have been playing a blinder in economic terms recently.

Construction

There was also some good news from this sector.

Construction output recorded an all-time level high in November 2018 in the chained volume measure seasonally adjusted series; the month-on-month series grew by 0.6%, resulting in the total value of construction output exceeding £14 billion for the first time since monthly records began in 2010.

So it is now in line with my Nine Elms crane count which is now 40. But this series has been unreliable after problems with the deflator and the switching of companies between it and services. So make of it what you will.

Trade

The problem with these so-called theme days for UK statistics is that we get too much information and some bits like the trade figures get ignored. Of course that may be the plan as they continue to be in deficit!

The total trade deficit (goods and services) narrowed £0.2 billion to £7.9 billion in the three months to November 2018 as both goods and services exports each increased £0.1 billion more than their respective imports.

There is something else troubling about the data which emphasises my theme that we know much less than we should about services trade.

The total UK trade deficit (goods and services) widened £4.1 billion to £28.6 billion in the 12 months to November 2018. The widening of the trade deficit was due mainly to a £4.4 billion narrowing in the trade in services surplus; the goods deficit narrowed by a lesser £0.3 billion.

We were told that our trade position in services had improved but that has then been more quietly revised away. For newer readers I made the point to the Sir Charlie Bean review of economic statistics that our data in this area was woeful. But nothing seems to have changed.

Comment

We find ourselves at something off a turning point but not the one that the media and chattering classes have obsessed about. In terms of today’s data Brexit is still in the distance but the world economic slow down is happening and seems set to impact more over the winter and into the spring. We should be grateful I think that we have retained at least some economic growth momentum as others look like they have lost it but these sort of slow downs tend to sing along with Muse.

Into the supermassive
Supermassive black hole
Supermassive black hole
Supermassive black hole
Supermassive black hole

So let us cross our fingers.

Andy Murray

Sad news about his injuries today so let me wish him well for the future as he has been a great champion and it may be a very long time before we see his like again.