CBI: UK Manufacturers Turning Increasingly Positive

CBI monthly Industrial Trends Survey: Manufacturing output continues to expand at a solid rate.

The CBI monthly Industrial Trends Survey of 481 firms found that manufacturers are expecting the rate of production to accelerate rapidly, with 11 of the 18 sub-sectors upgrading their expectations for output over the next three months.

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%.

33% of businesses reported a rise in output volumes, and 22% a fall, giving a balance of +11.

The pick up in this survey confirms that the recent resillience of the UK economy following the Brexit vote is likely to remain a theme that stays with us into the end of the year.

The CBI report also chimes with similar findings reported by the Markit/CIPS UK Manufacturing PMI released at the start of September.

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

16% of businesses reported export orders to be above normal and 26% below, resulting in a balance of +10%.

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.

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%).

“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 amongst the food, drink and motor vehicles sectors,” says Rain Newton-Smith, CBI Chief Economist.   

CBI members say that the fall in Pound 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,” says Newton-Smith.