Haver Analytics
Haver Analytics
United Kingdom
| May 28 2024

Sharp Quarterly Rebound in U.K. Industrial Survey

The U.K. industrial survey shows business optimism in the second quarter moving to a level of +9 from -2 in the first quarter of 2024; that's up even more sharply from a Q4 value of -15. The survey shows a sharp improvement in business optimism for the quarterly industrial survey.

U.K. export optimism improved even more sharply in the second quarter to a value of +7 from -20 in the first quarter. It had a reading of -15 in the fourth quarter of 2023. U.K. economy is logging sharply improved numbers in the second quarter.

Dividing the quarterly responses into those that are topical or that show changes compared to the last three months, the average reading in 2024-Q2 rises to +5 from -2 in the first quarter and zero in 2023-Q4. The forward-looking survey elements for expectations or 3-month ahead conditions log an average reading of 12, up sharply from an average of +1 in 2024-Q1 and from zero in 2023-Q4.

The table presents diffusion data in the form of ‘up-minus-down’ responses. In the second quarter, there are only 6 net lower responses after logging 13 in Q1 and eleven in 2023-Q4. Five of the six net negative responses in Q2 are in the category for topical data or for three-month changes experienced while only one is for the expectations or 3-month ahead categories. ‘Net foreign orders 3-months ahead’ is the only forward-looking category that is still negative in 2024-Q2.

The quarterly data show a total of six net negative readings in Q2, 13-net negative diffusion readings in Q1, 11-net negative readings in 2023-Q4 and 6-net negative readings in 2023-Q3; compared to these quarterly metrics, the annual average shows 11-net negative readings based on average diffusion responses. Percentile standing data calculated from net diffusion readings back to 1980 show a headline standing in the 78th percentile in Q2; that is up strongly from the first quarter standing that is only at its 57.5 percentile. There are sharp ongoing improvements.

The expectations readings for the Cap-Ex surveys show a jump to the 90.4 percentile in Q2 from the 17.8 percentile in Q1 for buildings, and to the 63.7 percentile in Q2 from the 28.8 percentile for equipment spending expectations. In Q2 there are only four entries with percentile standings below 50% (below their respective median on data back to 1980); only one of those is for forward-looking data and once again it is for the outlook for foreign orders. In contrast, there are eleven entries below their 50th percentile standing based on the Q1 data illustrating the substantial improvement that has been made in one quarter The standings for new order and domestic orders are sharply higher in Q2 (but still below median). While foreign orders ahead also improve their standing in Q2, the margin of improvement is small.

Looking at the standing data overall, current readings and lagged changes show a significant improvement in Q2 compared to Q1. But for expectations and other look-ahead readings, the improvement is even sharper (roughly 15 pct. points vs. 25 pct. pts.).

The industrial portion of the U.K. economy is making solid progress. Inflation has been settling down and the Bank of England has been in the process of weighing potential rate cuts. However, inflation news in the U.K., like in the U.S., has caught a snag and stopped falling as clearly as it had been. That could put rate cuts back in no-man’s land for a while. Firming economic data will lessen the need for cuts even with snap elections having been called.

  • Robert A. Brusca is Chief Economist of Fact and Opinion Economics, a consulting firm he founded in Manhattan. He has been an economist on Wall Street for over 25 years. He has visited central banking and large institutional clients in over 30 countries in his career as an economist. Mr. Brusca was a Divisional Research Chief at the Federal Reserve Bank of NY (Chief of the International Financial markets Division), a Fed Watcher at Irving Trust and Chief Economist at Nikko Securities International. He is widely quoted and appears in various media.   Mr. Brusca holds an MA and Ph.D. in economics from Michigan State University and a BA in Economics from the University of Michigan. His research pursues his strong interests in non aligned policy economics as well as international economics. FAO Economics’ research targets investors to assist them in making better investment decisions in stocks, bonds and in a variety of international assets. The company does not manage money and has no conflicts in giving economic advice.

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