Week 32, 2013: UK Production Index

Summary: The news that manufacturing in the UK grew by 1.9% in June was hailed by the media as an overwhelmingly positive sign that the economy is seemingly on its way out of the danger zone. In this week's chart, we take a closer look at the performance of the manufacturing and production indices over the past 25 years.

What does the chart show? The chart shows a seasonally adjusted index measuring output of the production industries in the UK, with 2010 being equal to 100. The red line shows the manufacturing output, which is a subset of the overall production industries output shown by the blue line. The other elements that also make up the production index are mining and quarrying, and the utility industries such as electricity and water.

Why is the chart interesting? Manufacturing output increased by 1.9% between May and June; this was the largest month-on-month growth rate since July last year. This is obviously positive news, but it is important to place it in the larger context of the past few decades.  As you can see from the chart, even after this month's growth we are still a very long way below the level of output we saw between around 1994 and 2007.  The 2008 crisis was devastating to the production sector, and it will take a long period of sustained growth to return to those pre-crisis levels. To borrow a phrase that the new Governor of the Bank of England, Mark Carney, used in his speech this morning: these latest numbers may be cause for relief, but there should be little satisfaction with the overall picture.