Manufacturing output continues to boom in February 2018

Posted on 20 Feb 2018 by Jonny Williamson

Manufacturing order books and export order books remained well above their long run average, new study has revealed.

Manufacturing order books and export order books remained robust, well above their long run average – image courtesy of Depositphotos.

According to the CBI Industrial Trends Survey of 397 manufacturers, output grew at a healthy pace in the three months to February.

Growth was broad-based with output growing in 16 out of 17 sub-sectors with growth predominantly driven by Food, Drink and Tobacco, and Motor Vehicle and Transport Equipment sub-sectors.

Respondents anticipate that output growth will slow a little over the next three months, broadly matching the pace seen in September and October last year.

Expectations for output price inflation weakened from last month’s 34 year high, but remain above the historical average. Meanwhile, stocks were considered to be above adequate levels, but below the long-run average.

Demand in the manufacturing sector should continue to be buoyed by the lower pound and buoyant global economy. But the CBI expects consumer-facing companies and retailers to continue to struggle while consumer incomes remain under pressure from higher inflation.

Anna Leach, CBI head of Economic Intelligence, said: “This month saw another strong showing from UK manufacturers. Although order books weren’t quite as buoyant as they were last month, demand remains strong and output grew briskly.

“With the Brexit negotiations reaching a critical juncture, many businesses are concerned about future barriers to trade and are looking for clarity over the future relationship with the EU. Remaining in a comprehensive customs union will help alleviate some of those fears and give firms the confidence to invest and grow.”

Tom Crotty, group director of Ineos and chair of CBI Manufacturing Council, said: “Manufacturers are benefiting from the health of the global market place. But companies still struggle to find the workers they need to grow their business.

“To ensure there’s a strong pipeline of people with the technical skills needed, we need young people to receive further education and careers advice built upon the needs of employers.”

Reinvention of operational strategies by adopting IoT technologies

Don Rogers, Head of Manufacturing Industry Practice at WWT, says: “The UK manufacturing sector is slowly waking up to the untapped potential which technologies bring to provide sustainable growth for UK businesses and the wider UK economy.

“Conditions are ripe for industry to drive investments to enhance capacity, meet customer demand and boost efficient workflow processes using productivity-enhancing technology. Manufacturers are ready to reinvent operational strategies by adopting IoT technologies to trigger a productivity boost and cut costs.

“However, this is easier said than done. Businesses need to redirect their focus to their existing IT architecture and whether it is fit for purpose to accommodate IoT technologies.”

Key findings:

  • 30% of manufacturers reported total order books to be above normal, and 20% said they were below normal, giving a balance of +10% – above the negative long-run average of -14%
  • 22% of firms said their export order books were above normal, and 12% said they were below normal, giving a balance of +10% – far above the negative long run average of -18%
  • 39% of businesses said the volume of output over the past three months was up, and 15% said it was down, giving a balance of +24%
  • Manufacturers expect output growth to slow in the coming quarter, with 32% predicting volumes to increase, and 16% expecting a decline, giving a balance of +16%
  • 31% of companies expect average selling prices to increase in the coming three months, with 6% predicting a decline, giving a balance of 25%
  • 16% of firms said their present stocks of finished goods are more than adequate, whilst 11% said they were less than adequate, giving a balance of +5%.

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