Manufacturing output picks up pace

Published:  25 May, 2017

Manufacturing order books improved on April, and output growth accelerated in the three months to May, according to the CBI’s latest Industrial Trends Survey.

The survey of 432 manufacturers reported that total order books were the highest since February 2015, broadly matching the strong levels seen earlier this year. Export orders also stayed robust, equalling the level seen in March (itself, the highest level seen since December 2013).

Output growth picked up pace, seeing the fastest rise since December 2013. This was underpinned by the mechanical engineering and chemicals sectors. Firms expect another firm rise in production over the coming quarter.

But pricing pressures remain strong, with manufacturers continuing to expect a sharp rise in average selling prices. Nonetheless, expectations have eased slightly on their peak back in February. Stock adequacy improved marginally, but remains below average.

Rain Newton-Smith, CBI chief economist, said:

“The summer sun has come out early for Britain’s manufacturers. Robust demand at both home and abroad is reflected in strong order books, and output is picking up the pace.

“On the other side of the coin though, we have mounting cost pressures and expectations for factory-gate price rises are running high.

“Boosting productivity is key to alleviating some of the cost pressures that manufacturers are facing. Sustained investment in innovation and education will be vital to shore up the success of British industry.”

Key findings:

• 26% of manufacturers reported total order books to be above normal, and 17% said they were below normal, giving a balance of +9%. This was the highest level seen since February 2015 (+10%), and well above the long-run average (-15%)

• 22% of firms said their export order books were above normal, and 12% said they were below normal, giving a balance of +10%. This was the same as the level seen in March, which was the highest balance since December 2013 (+11%)

• 41% of businesses said the volume of output over the past three months was up, and 12% said it was down, giving a rounded balance of +28% - the fastest pace of growth since December 2013 (+29%)

• Manufacturers expect output to grow at the same robust pace in the coming quarter, with 37% predicting growth, and 10% a decline, giving a rounded balance of +28%

• Average selling prices are still expected to rise strongly, though predictions of growth have eased slightly (+23%) from their peak in February (+32%)

• 16% of firms said their present stocks of finished goods are more than adequate, whilst 12% said they were less adequate, giving a balance of +4%.

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