UK Manufacturing Activity Growing at Fastest Pace Since 1995 say CBI
- Written by: Gary Howes
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The CBI reports that production among UK manufacturers grew at the fastest pace since January 1995 in the three months to July.
According to the latest quarterly CBI Industrial Trends Survey, employee headcount increased at the fastest rate for three years and that hiring intentions for the coming quarter also improved.
The news is evidence that the UK economy might be seeing its manufacturing sector picking up some of the economic slack being left behind in the wake of slowing consumer activity.
Optimism rose marginally in the three months to July, while export optimism for the year ahead rose at a slower, but still healthy pace.
The headline total orders balance fell from +16 to +10 but the output expectations balance, which has a fairly good historical relationship with the official measure of manufacturing output, rose slightly from +27 to +28.
The data all point to a pick-up in UK manufacturing activity in the second-quarter of 2017 and bodes well for the mid-week release of official GDP statistics.
“The fairly upbeat tone of July’s CBI Industrial Trends Survey suggests that the manufacturing sector gathered momentum at the start of Q3,” says Andrew Wishart, Assistant Economist at Capital Economics.
The data is consistent with quarterly manufacturing output growth accelerating to 1.0% at the start of Q3, up sharply from the -0.1% which Capital Economics expect to be revealed in the preliminary estimate of Q2 GDP released tomorrow.
Furthermore, the quarterly survey balances also revealed further reason to expect the recent weakness in manufacturing to prove temporary.
The business optimism balance increased from +1 to +5 while investment intentions also strengthened.
“And although the export expectations balance dipped from +30 to +13, suggesting that the benefits from the weaker Pound may be fading somewhat, the expected prices balance fell sharply from +29 to +9,” says Wishart.
Capital Economics argue this provides another reason to expect the rise in inflation to be temporary.
“Overall, then, the latest survey data supports our view that the manufacturing sector should help to offset a slowdown in consumer services this year,” says Wishart.
