UK Manufacturing Gloom Deepens: CBI Survey

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The UK's manufacturing is coming under increasing pressure according to a new survey, although signs of inflationary pressures in the sector continue to ease.

Sentiment among manufacturers deteriorated and output volumes fell moderately in the three months to May, according to the CBI's latest Industrial Trends Survey.

Total order books were reported to be below normal, to a broadly similar extent as in April. Export order books were also seen as below normal, but to a greater extent than last month.

The data corroborate the findings of the UK Manufacturing PMI surveys for both April and May which show the sector to be in an ongoing contraction.

"Our latest survey suggests the recent pressures on manufacturing activity have so far persisted through the second quarter. Sentiment continues to deteriorate and expectations for output growth in the coming three months have turned negative, which doesn't suggest UK manufacturing is poised to recover any significant momentum in the near-term," says Anna Leach, CBI Deputy Chief Economist.

Manufacturers’ expectations for selling price inflation were meanwhile at their softest for over two years in the three months to May (+21%, from +23%) to their lowest since March 2021.

Although expectations for selling price inflation were comfortably below the multi-decade high seen in 2022 (+80% in March 2022), they remain well above the long-run average (+6%).

The CBI's findings come on the same day that the UK statistics office reported inflation had fallen sharply in April compared to a year earlier, however, the figures blindsided analysts who were looking for a sharper fall.

The CBI manufacturing survey found manufacturing output volumes fell modestly in the three months to May (weighted balance of -10%, from -15% in the three months to April) and are expected to fall moderately again in the three months to August (-5%), ending four consecutive months of positive expectations.

Output fell in 9 out of 17 sub-sectors in the three months to May. The decrease was driven by the motor vehicles & transport equipment, chemicals, and food, drink & tobacco sub-sectors.

Total order books were reported as below "normal" in May, to a broadly similar extent as in April (-17% from -20%) and were marginally weaker than the long-run average (-13%).

Export order books were also seen as below normal, but to a greater extent than last month (-26% from -9%) and were also below average (-18%).

"With demand subdued and the outlook for costs improving, manufacturers expect growth in their selling prices to slow, which should feed through to measures of inflation over time," says Leach.