UK manufacturing output dips, but outlook positive

Manufacturing firms saw output growth ease in the three months to September, while expectations for selling prices remain elevated, according to the CBI’s latest monthly Industrial Trends Survey.

UK Manufacturing SME Manufacturers - BMI Engineering employs 27 people at its factory in the Black Country.
Both total orders books and export order books remained strong, although total order books softened somewhat on August – image courtesy of BMI Engineering.

The survey of almost 450 manufacturers found that while output growth slowed last quarter, largely driven by the food and drink sector, the rate of growth remained well above the long-run average.

Respondents reportedly expect output growth to bounce back next quarter, broadly matching the robust pace seen in the three months to July and August.

Both total orders books and export order books remained strong, although total order books softened somewhat on August. The deterioration was relatively broad-based, the CBI noted, with nine of the 17 sub-sectors reporting a decline relative to August.

Firms’ expectations for output price inflation remain elevated after picking up in the three months to August, but have eased compared with the first half of 2017.

Additionally, stock levels were considered to be above adequate levels, but below the long-run average.

CBI head of economic intelligence, Anna Leach commented: “Manufacturers continue to report solid growth in output, while total order books and export order books are holding firm.

“Expectations for selling prices were largely in-line with the previous month, but price pressures do appear to have moderated somewhat since earlier in the year.”

Key findings:

  • 24% of manufacturers reported total order books to be above normal, and 17% said they were below normal, giving a balance of +7% – that is below the +13% recorded in August but well above the long-run average of -14%
  • 19% of firms said their export order books were above normal, and 9% said they were below normal, giving a rounded balance of +10% (compared to +11% in August) – well above the long-run average of -19%
  • 37% of businesses said the volume of output over the past three months was up, and 20% said it was down, giving a balance of +17% (compared with +30% in August) – above the long-run average of +3%
  • Manufacturers expect output to growth to accelerate in the coming quarter, with 39% predicting volumes to increase, and 12% expecting a decline, giving a rounded balance of +28%.
  • 27% of companies expect average selling prices to increase in the coming three months, with only 9% predicting a decline, giving a rounded balance of +18% – significantly above long-run average of +2%
  • 16% of firms said their present stocks of finished goods are more than adequate, whilst 10% said they were less than adequate, giving a balance of +6% – below the long-run average (+13%).