Steadily rising orders and output caused a surge in optimism among UK manufacturers in the three months to October according to the CBI.
The CBI’s latest quarterly industrial trends survey showed that optimism among manufacturers is at its highest since April 2010 thanks to steadily increasing orders and output.
The survey of more than 350 manufacturers showed that total new orders grew for the second consecutive quarter and output rose for the third consecutive quarter.
Total new orders grew at the fastest pace since April 2012, with growth in the volume of domestic orders at its highest rate since April 2011.
Based on this, survey participants communicated that they were hopeful about the business outlook in 2014 – including export opportunities despite new export orders growing only slightly.
To support more confident business plans, survey participants showed strong intent to invest in product innovation and other strategic areas.
Investment intentions for ‘intangibles’ of this nature were the highest the CBI has recorded for six quarters and were accompanied by commitment to investment in training and development.
However, in contrast, plans by manufacturers to invest in plant and machinery declined on last quarter.
Stephen Gifford, CBI Director of Economics, welcomed the growing confidence expressed in the data and said that, on the back of recent consistent growth in orders, the coming quarter is “promising”.
However, Mr Gifford also observed that “there are only limited signs of rebalancing towards exports or investment, with marginal growth in export orders and firms scaling back plans for capital expenditure on plant and machinery.”
CBI Quarterly Industrial Trends Survey: Key findings for the three months to October 2013
- 32% of businesses said they were more optimistic about the general business situation than three months ago and 8% less, giving a balance of +24%, the highest since April 2010 (+24%)
- 30% of businesses reported an increase in total orders and 24% said they decreased, giving a balance of +6%, the highest since April 2012 (+8%)
- The balance for new domestic orders (+10%) was the highest since April 2011 (+15%), but the balance for new export orders (+3%) was down on the three months to July (+7%)
- Output increased for the third consecutive quarter (a rounded balance of +8%) with 25% of firms saying output volumes were up and 16% saying they were down
- Both domestic and export output prices declined marginally this quarter (-4% and -6% respectively) and unit costs were flat (0%)
- Manufacturers’ stocks of raw materials, work in progress and finished goods were all significantly up on the last quarter (+12%, +13% and +14% respectively).
- A balance of +14% of manufacturers expected total new orders to increase, with a balance of +13% expecting domestic orders to rise and +7% expecting export orders to go up
- Manufacturers also expect output and numbers employed to increase over the next three months (+9% and +7% respectively)
- Average domestic prices and export prices are expected to be broadly flat (-2% and +1% respectively)
- A balance of +6% of manufacturers expect average unit costs to increase in the next quarter.
Investment plans and constraints:
- Concern about a shortage of skilled labour acting as a constraint on output in the next three months was cited by 21% of firms, the highest since July 2012 (21%)
- Concern about political and economic conditions abroad as a factor likely to limit export orders was cited by 31% of manufacturers, slightly down on the last quarter, but ahead of the long-run average of 22%
- Manufacturers’ investment intentions compared with the previous twelve months remain above average for product and process innovation (+28% compared with +10%) and training (+33% compared with +12%), but in line with the long-run average for plant and machinery (-8% compared with -9%) and buildings (-20%)
- Uncertainty about demand remains the number one constraint on investment, but is only moderately above its long-run average (59% of firms cited this, against a long-run average of 52%)
- A survey record high of 18% of firms cited labour shortages as a factor likely to limit capital expenditure authorisations.