CBI says manufacturing is strong despite poor Q2 GDP results

Posted on 26 Jul 2012 by Tim Brown

The latest CBI quarterly Industrial Trends Survey indicates that the UK manufacturing sector is showing resilience in the face of challenging economic conditions, with orders and output growth steady.

The CBI has said that orders recorded by manufacturers in its latest industrial survey gives a balance of +8% – the strongest seen this year, and above the long-run average of 0%.

Despite the depressing ONS figure released on Wednesday which showed GDP had shrunk 0.7% in the last quarter, the CBI’s survey provides a more upbeat view.

Both measures of activity – orders and output – indicated modest growth in the three months to July, while manufacturers’ optimism about the general business situation was broadly stable relative to the previous three months (-6%), according to the the business lobbying group CBI.

Of the 398 manufacturers responding to the survey, 29% said that orders had increased in the three months to July, while 26% said that they had fallen. The resulting balance of +3% is above the long-run average (-3%), but a little below the +8% balance in the three months to April.

Export orders weakened  (-6%), but the balance was broadly in line with its long-run average (-8%). Total orders are expected to grow at a similar pace over the next three months (+4%), with export orders expected to record zero growth.

Output growth picked up slightly in the quarter to July, with 29% of manufacturers reporting output volumes were up compared with the previous three months, and 21% saying they were down. The resulting balance of +8% is the strongest seen this year. A further modest pick-up in growth is expected over the next three months (+11%).

Despite a further escalation in the eurozone crisis, Anna Leach, CBI head of economic analysis, believes that the UK manufacturing sector is broadly stable.

“Both demand and production grew steadily in the three months to July, and this is expected to continue over the next three months,” said Ms Leach. “However, with Europe as our biggest export market, and while the eurozone crisis continues unresolved, prospects for UK manufacturing will remain uncertain.”

But underling the affect of the eurozone crisi, the number of firms citing uncertainty about demand as a factor likely to limit capital expenditure over the coming year was above the long-run average, up 55% compared with an average of +49%.