Manufacturers See No Prospect of Recovery Before Year-end: CBI

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According to the CBI's latest Industrial Trends Survey, manufacturers reported that output volumes declined more quickly than expected in the three months to September.

Output volumes are expected to stagnate over the next three months.

Following eight consecutive months in which expectations for selling price inflation have eased, manufacturers reported that sales price growth would increase again in the three months to December.

However, barring last month’s survey, selling price expectations remain at their weakest since early 2021.

"Output in the manufacturing sector weakened over the past quarter and is expected to flatline at best through the rest of this year. With order books having been below their long-run average for 8 out of the last 9 months, manufacturers see little prospect of a recovery in the final months of the year," says Anna Leach, CBI Deputy Chief Economist.

The CBI findings come on the same day S&P Global's Manufacturing PMI confirmed the sector remained mired in contractionary territory, although input inflation facing manufacturers has fallen markedly.

However, the CBI reports that materials and financing costs are high, squeezing manufacturers and their customers.

"The Autumn Statement provides an important opportunity for the Government to lay the foundations for a sustainable recovery through a broad focus on tax incentives for investment, support with upskilling workers and help for firms to make the most of green growth opportunities," says Leach.

The survey, based on the responses of 292 manufacturers, found:

1. Output volumes fell in the three months to September (weighted balance of -10%, from -19% in the three months to August). Output is expected to be unchanged in the three months to December (0%).
2. Output fell in 9 out of 17 sub-sectors in the three months to September, with the decline driven by the motor vehicles & transport equipment, chemicals and paper, printing & media sub-sectors.
3. Total order books were reported as below “normal” in September to a broadly similar extent to August (-18% from -15%). This left the level of total order books below the long-run average (-13%). Export order books were also seen as below “normal”, having also deteriorated from last month (-23%, from -18%). This brought them below the long-run average (-18%).
4. Expectations for average selling price inflation rose marginally in the three months to September (+14%, from +8% in the three months to August), ending a streak of eight consecutive months in which expectations had eased. Selling price expectations were comfortably below the multi-decade high seen in 2022 (+80% in March 2022), but moved back above the long-run average (+7%).
5. Stocks of finished goods were seen as more than “adequate” in September (+10% from +7% in August – long-run average +12%).