Manufacturing Output Snaps 18-month Losing Streak Says CBI

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According to a much-watched survey, UK manufacturers reported that output volumes rose in the three months to May, for the first time since November 2022.

The CBI's latest Industrial Trends Survey also showed manufacturers expect output to rise further in the three months to August, albeit at a modest pace.

"Expectations for higher output volumes have finally been realised in the three months to May," says Anna Leach, the CBI's Deputy Chief Economist.

However, the survey shows order books remain under pressure, with both total and export order books weakening in May and stocks of finished goods were reported to be more than adequate to meet expected demand.

"Manufacturers expect to increase output through the summer months, but any recovery looks set to be fairly gradual, with order books soft and inventory levels relatively high," says Leach.

The survey also shows expectations for selling price inflation softened, having picked up earlier in the year. This will come as a relief for the Bank of England's Monetary Policy Committee which has been wary of sticky inflation as firms pass on costs.

The Bank is anticipated to cut interest rates in either June or August.

The Details

Output volumes rose in the three months to May, having been flat or falling in every month since November 2022 (weighted balance of +14%, from +3% in the three months to April). Output is expected to rise modestly in the three months to August (+7%).

Output increased in only 8 out of 17 sub-sectors, but this was sufficient to offset flat or falling volumes in the remaining sub-sectors, with the chemicals, food, drink & tobacco and motor vehicles & transport equipment sub-sectors driving overall growth.

Total order books weakened in the three months to May, with a net balance reporting order books as “below normal” falling to -33% (from -23%). The level of order books therefore remained below the long-run average (-13%).

Export order books were seen as below normal and deteriorated relative to last month (-27%, from -23%). This was also below the long-run average (-18%).

Expectations for average selling price inflation softened in May (+15%, from +27% in April), having picked up steadily over the first four months of 2024.

Stock adequacy for finished goods improved in the three months to May, with the net balance of firms reporting that stocks were “more than adequate” rising to +14% (from -1% in the three months to April), broadly in line with the long-run average.