Manufacturers’
output volumes growth slowed following a robust showing in the previous month,
according to the latest CBI Industrial Trends Survey.
The survey, of 409
firms, revealed that output growth slowed in the three months to September, but
remained above the long-term average.
Output expanded in
10 out of 17 sub-sectors, with growth driven predominantly by the mechanical
engineering, food, drink & tobacco, plastic products, and metal products
sectors. Manufacturers expect output growth to pick up over the next three
months.
Meanwhile, total
order books weakened slightly again but remained well above the long-run
average. Export order books also faded a little to their weakest in almost a
year, but likewise remained well above the long run average.
Expectations for
output price inflation remained firmly above the long-run average, while stocks
of finished goods remained adequate but below the long-run average.
We expect UK
manufacturers to continue benefitting from healthy external demand and a lower
sterling exchange rate, but overall economic growth is expected to remain
subdued, reflecting weak household income growth and the drag on investment
from Brexit uncertainty. For more detail, see our June economic
forecast.
Anna Leach, CBI Head
of Economic Intelligence, said: “While manufacturing order books remain strong
and output is still growing, Brexit uncertainty continues to cloud the outlook.
Heightened fears of a ‘no deal’ Brexit scenario have prompted some firms to
move publicly from contingency planning to action.
“Efforts on all
sides must be geared towards securing the Withdrawal Agreement and - crucially
- the transition period. This will provide temporary but essential relief for
businesses of all sizes and sectors.
“Looking ahead to
the Autumn Budget, business rate reform, coupled with movement on capital
allowances, could help encourage productive investment against this uncertain
backdrop.”
Tom Crotty, Group
Director, INEOS, and Chair of the CBI Manufacturing Council, said: “Robust
output volumes and order books are good news for British manufacturers, who
have benefitted from a healthy global economy and lower sterling exchange rate.
However, the continued uncertainty surrounding the final six months of Brexit
negotiations presents a real risk to the continuation of this strong momentum.
“In the coming
months, manufacturers will be looking to the Government to protect the
frictionless trade with the EU that they need to thrive. And it is important
that measures to bolster competitiveness domestically – such as getting the
Apprenticeship Levy fit for purpose – aren’t overlooked.”
Key findings:
- 20% of manufacturers reported
total order books to be above normal, and 20% said they were below normal,
giving a rounded balance of -1%
- 17% of firms said their
export order books were above normal, and 13% said they were below normal,
giving a rounded balance of +5%
- 33% of businesses said the
volume of output over the past three months was up, and 22% said it was
down, giving a balance of +11%
- Manufacturers expect output
to grow at a faster pace in the coming quarter, with 31% predicting
volumes to increase, and 12% expecting a decline, giving a balance of +19%
- 20% of companies expect
average selling prices to increase in the coming three months, with 6%
predicting a decrease, giving a rounded balance of +13% (compared with
+15% in August)
- 16% of firms said their
present stocks of finished goods were more than adequate, whilst 13% said
they were less than adequate, giving a balance of +3%, below the long-run
average (+13%).
