The Greater Birmingham Chambers of Commerce Quarterly Economic Survey (QES) for Q4 2013 showed a sectoral divergence in domestic sales and advance order markets, as well as business confidence. The number of service sector firms reporting an improvement in these areas increased whereas for manufacturers, this number fell. However, both sectors reported improvements for export markets and labour growth. shows that the QES index for service sector domestic sales increased to 70 from 64, the highest index score since Q4 2007. However, fewer manufacturing firms reported an increase in domestic sales, with the index figure falling to 64 from 70.
The QES draws its results from questionnaire responses completed by businesses. For Q4 2013 a total of 392 companies were surveyed from across the Greater Birmingham and Solihull LEP area. An index score above 50 indicates that more firms overall are reporting improvement on the previous month; an index score of 50 means that on balance, there is no change; and an index score of below 50 indicates an overall decline in performance.
0.8% GDP Growth in Q3 2013
80 QES Index
1
70
0.5
60 0
50 -0.5
Manufacturing
40
Services
-1
David Bharier Economic Policy Advisor 0121 607 1814 d.bharier@birmingham-chamber.com Greater Birmingham Chambers of Commerce 75 Harborne Road, Edgbaston Birmingham, B15 3DH
30 -1.5
20 -2.1% GDP Growth in Q4 2008
10
-2
0
For previous editions of the QES, click here To view the British Chambers of Commerce QES, click here
-2.5
Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 2007 2008 2008 2009 2009 2010 2010 2011 2011 2012 2012 2013 2013
www.birmingham-chamber.com
Manufacturing Domestic Sales
Manufacturing Turnover Confidence
Index Score: 65
Index Score: 80
Index Score: 70
Index Score: 69
Service Sector Domestic Sales
Export Sales (Both Sectors)
Index Score: 62
Service Sector Labour Growth
The Quarterly Economic Survey (QES) is produced by Greater Birmingham Chambers of Commerce (GBCC) every quarter to assess how businesses are performing on a range of key indicators. Data from every UK region is compiled by the British Chambers of Commerce to form the largest business survey of its kind. The results from QES are monitored by the Bank of England, HM Treasury, and the European Commission as a quarterly indication of business conditions. As one of the biggest Chambers in the country, the results from the Greater Birmingham Chambers’ QES form a vital component in understanding the economic landscape of the region and BCCG continues to use the results of QES to inform its policy positions.
Sectoral divergence in domestic advance orders QES Index
As with domestic sales, both sectors saw a divergence in domestic advance orders in Q4.
80 Services Manufacturers
70 60 50
A higher proportion of service firms reported improvements, with the index figure rising to 70 from 63 last quarter, the highest since 2007 ( ).
40 30 20
However, fewer manufacturers reported improvements, with the index score falling to 65 from 68.
10 0 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 2007 2008 2008 2009 2009 2010 2010 2011 2011 2012 2012 2013 2013
The QES and GDP growth
Historically, when the GDP rate shows an increase, we should also expect to see a rise in the number of firms reporting improved sales in the QES.
1.5
GDP Growth (%)
The QES index for domestic sales positively correlates to the GDP growth rate ( ).
1 0.5 0 20
30
40
50
60
70
-0.5 -1 -1.5 -2 -2.5
Exports continue to grow
More manufacturers reported improvements in export sales, with the index figure rising to 69 from 67 last quarter. Services recorded a similar improvement, with the index score rising to 69 from 60 last quarter ( ). The QES export index shows a similar growth pattern to the rise in the value of West Midlands exports.
QES Index
80
Both sectors saw continued improvement in their export performance for Q4.
70
QES index for manufacturing sales Value of WM Exports in Q3 2013: £6.5 bn £7,000
Manufacturers £6,000
Services 60 £5,000
50 £4,000
40 £3,000
30 £2,000
20 10 0
£1,000
£0
Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 2007 2008 2008 2009 2009 2010 2010 2011 2011 2012 2012 2013 2013
Labour growth continues upward trend for services QES Index
Sectoral disparity also emerged for the number of firms reporting that their labour force had increased over the last 3 months.
70 Services Manufacturers
60 50 40
For service sector firms, the index score rose to 62 from 59 last quarter. For manufacturers, the index score fell to 60 from 63 ( ).
30 20 10 0 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 2007 2008 2008 2009 2009 2010 2010 2011 2011 2012 2012 2013 2013
More businesses face recruitment difficulties QES %
More firms from both sectors reported recruitment difficulties in Q4. The number of manufacturers reporting difficulties rose to 63% from 58% last quarter. For service firms, this rose to 59% from 52% ( ).
70 Manufacturers Services
60 50 40 30 20 10 0
Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 2007 2008 2008 2009 2009 2010 2010 2011 2011 2012 2012 2013 2013
Skilled positions hardest to recruit to
are
Skilled manual/technical jobs have historically been the hardest to recruit to for manufacturers. For Q4, 38% of firms reported recruitment difficulties for skilled jobs ( ).
100% 90%
Un and semi-skilled
80% 70%
Clerical
60% Professional / managerial
50% 40%
For service firms, 44% of those reporting difficulties said managerial positions were the hardest to recruit to.
Skilled manual / technical
30% 20% 10% 0% Q4 2007
Q4 2008
Q4 2009
Q4 2010
Q4 2011
Q4 2012
Q4 2013
Both sectors report cash flow improvements QES Index
The cash flow situation for both sectors improved in Q4. For manufacturers, the index score rose to 57 from 52 last quarter, the highest since 2007.
70 60 50
Manufacturers Services
40
Service sector firms reported a similar improvement, with the index score rising to 57 from 53 ( ).
30 20 10 0 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 2007 2008 2008 2009 2009 2010 2010 2011 2011 2012 2012 2013 2013
The number of firms reporting confidence that their profitability would improve remained largely unchanged. For service firms, the index score rose to 72 from 71 last quarter. For manufacturers, the index rose to 76 from 75 ( ).
QES Index
The QES index for turnover and profitability confidence remained high for Q4. For the service sector, the index score for firms that believed their turnover would increase in the next 12 months rose to 81 from 78 last quarter. For manufacturers, the index score fell slightly to 80 from 85 last quarter ( ).
100 90 80
Manufacturers Services
70 60 50 40 30 20 10 0 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 2007 2008 2008 2009 2009 2010 2010 2011 2011 2012 2012 2013 2013
90
QES Index
Turnover and profitability confidence remains high
80 70
Manufacturers Services
60 50 40 30 20 10 0 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 2007 2008 2008 2009 2009 2010 2010 2011 2011 2012 2012 2013 2013
Firms expect prices to see a further increase
Overlaid is inflation.
the
CPI rate of
QES Index
A higher proportion of firms believed that prices/costs would rise in the next 3 months. For manufacturers, the index score rose to 64 from 57 last quarter. For service firms, the index score saw a similar increase to 63 from 58, the highest since 2008 ( ).
80
6
70
Manufacturers
60
Services
5
4
50 2.7% CPI Inflation in Q3 2013
40
3
30 2
20 1
10 0
0
Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 2007 2008 2008 2009 2009 2010 2010 2011 2011 2012 2012 2013 2013 Services
Raw material costs are causing price rises The majority of manufacturers currently suffering pressures to raise prices said this was due to the price of raw materials. For service firms, price pressures came primarily from overheads ( ).
Manufacturing Other overheads
Finance costs
Raw Material Prices
Pay Settlements
51% 36% 13% 11% 20% 42% 16% 11%
Firms cite competition as biggest external factor When reporting on the external factors that are more of a concern than 3 months ago, both sectors overwhelmingly said competition. This indicates a gradual shift away from concerns over monetary policy ( ).
Services Manufacturing Corporate Taxation
14% 10%
Competition
34% 28%
Inflation
18% 18%
Business Rates
14% 18%
Exchange Rate
9% 17%
Interest Rates
12% 9%
Greater Birmingham Chambers of Commerce 75 Harborne Road Edgbaston Birmingham B15 3DH www.birmingham-chamber.com