Export orders grow says CBI

Posted on 20 Jan 2011 by The Manufacturer

The manufacturing recovery is well on track, driven primarily by export orders, the CBI said today (Thursday).

Of the 394 manufacturers that responded to the January Quarterly Industrial Trends Survey, 32% had seen an increase in output over the past three months, while 16% said that it had fallen — giving a balance of +16%, compared with +9% in October. This was driven primarily by growth in export orders (+13%), with domestic demand rising more modestly (+9%). Domestic demand growth was, however, stronger than had been anticipated in October (+2%).

Over the next three months, output is expected to grow at a similar pace again (+17%), driven primarily by another strong rise in export orders, with a balance of +18% of firms expecting export orders to increase. Domestic orders are expected to be broadly flat (-3%). When asked about likely output constraints over the next quarter, fewer companies cited orders and sales (68%), the lowest since July 2007.

Manufacturers have raised output prices markedly during the last quarter. Both average domestic and export prices rose at the fastest pace since October 2008 (balance of +13% and +14% respectively). Looking to the next quarter, price increases are expected to accelerate sharply: a balance of +31% of firms expect domestic prices to rise alongside +34% for export prices. The latter balance is the highest since January 1995 (+34%).

In line with the improving demand outlook, manufacturers’ investment intentions have strengthened. Investment in plant & machinery is expected to increase over the next twelve months for a balance of +10%, and companies also plan to spend more on training and retraining (+19%), and on product and process innovation (+22%) over the coming year. Compared to the previous year, firms no longer plan to reduce their capital expenditure on buildings over the next year, with the survey balance (+1%) the highest since July 1997 (+2%).

Ian McCafferty, CBI chief economic adviser, said: “The recovery in the manufacturing sector is firmly in place and looks set to continue. Production has been boosted this quarter by a strengthening in both domestic and overseas demand and, over the next three months, companies expect further growth, driven by another rise in export orders.

“But manufacturers have come under intense pressure to pass on rising costs: they have increased prices markedly in this quarter, and expect to raise them at an even faster pace over the next three months. This will drive further inflationary pressure in the wider economy.”