UK manufacturing output maintains expansion

Posted on 22 Sep 2016 by Jonny Williamson

Manufacturing output has continued to expand at a solid rate, according to the latest CBI monthly Industrial Trends Survey.

The CBI’s survey of more than 480 firms found that sentiment within UK manufacturing is positive, with the rate of production expected to accelerate rapidly.

Eleven of the 18 sub-sectors have upgraded their expectations for output over the coming three months.

Meanwhile, export order books weakened slightly, but remained comfortably above their long-run average.

According to the CBI, chemical firms experienced the sharpest drop in overseas demand, contrasting with the motor vehicle and transport sector, which reported the greatest improvement.  Total orders remained unchanged from the previous month, well above average levels.

Companies’ near-term expectations for prices eased, with a majority of respondents anticipating no change over the next three months.

Stock adequacy climbed to the highest level since June 2013, with half of the change in the balance accounted for by chemical manufacturers, who also scaled back their output the most out of the survey respondents.

Rain Newton-Smith, director of Economics, CBI
Rain Newton-Smith, director of Economics, CBI.

CBI chief economist, Rain Newton-Smith explained: “It’s good to see that manufacturers are enjoying a lingering summer with output running at a strong pace and manufacturers’ order books remaining solid, particularly among the food, drink and motor vehicles sectors.

“Our members tell us and our surveys show that the fall in sterling has boosted international competitiveness for many businesses, with export order books remaining well above average in September, despite weakening slightly.

“But there are plenty of challenges ahead for manufacturers as we adjust to a new relationship with the EU and the rest of the world. That’s why we want to see a focus on promoting investment and innovation in the Autumn Statement to ensure our makers are able to put their best foot forward and adjust to new opportunities.”

Key findings:

  • 18% of businesses reported total orders to be above normal and 22% said orders were below normal, giving a rounded balance of -5%.
  • 16% of businesses reported export orders to be above normal and 26% below, resulting in a balance of +10%.
  • 33% of businesses reported a rise in output volumes, and 22% a fall, giving a balance of +11%.
  • Output growth is expected to increase over the next three months, with 37% companies expected a rise and 15% expecting a fall, resulting in a balance of +22%.
  • Average prices are expected to reduce slightly over the next quarter, with 15% companies expecting to raise prices and 9% expecting to cut prices, giving a rounded balance of +5%, down from +8% last month.
  • 22% of businesses reported stocks as more than adequate to meet expected demand, and 7% less than adequate, resulting in a rounded balance of +16%, an increase on +4% from the previous month and the highest balance since June 2013 (+21%).