Manufacturing output
growth remained broadly steady in the three months to May, while stocks of
finished goods were reported as significantly “above adequate”, at their
highest balance since the financial crisis.
That’s according to
the latest monthly CBI Industrial Trends Survey.
The survey of 279
manufacturing firms revealed that output growth was predominantly driven by the
mechanical engineering, chemicals, and food, drink & tobacco sub-sectors,
while the motor vehicles & transport equipment and the textiles & clothing
sub-sectors proved the biggest drags on growth. Manufacturers expect output
volumes to be roughly flat in the next three months.
Order books further
deteriorated compared with the previous month. Total orders reached their
lowest balance since October 2016, while export orders worsened to a balance
not seen since July 2016. Nonetheless, both were broadly in line with the
long-run averages.
Inflation
expectations for the next three months remained flat, for the second survey in
a row. Inflation expectations are now at their lowest since March 2016.
Anna Leach, CBI
Deputy Chief Economist, said: “These results provide further evidence that
manufacturers have been stockpiling at a rapid pace as part of their Brexit
contingency plans. When combined with a sharp decline in order books, it’s
clear why manufacturing firms are so keen to see a swift end to the current
Brexit impasse.
“With investment
down, stockpiling up, and the threat of a no-deal ever present, we desperately
need parliament to thrash out a viable deal in the national interest. Where the
cross-party talks failed, Parliament must succeed, or continued economic paralysis
will see us hurtle ever closer to disaster.”
Tom Crotty, Group
Director of INEOS and Chair of CBI Manufacturing Council, said: “Manufacturers
are being forced into putting huge amounts of money and resources into
contingency planning that could have been spent on creating jobs or making
investments in new technology. This relentless Brexit uncertainty must be
lifted as a matter of urgency.
“As long as the
deadlock continues, the sector is being held back from solving long-term
challenges such as raising productivity and addressing skills shortages.”
Across the economy,
stock-building has supported economic growth in early 2019. However, business
surveys suggest that underlying conditions remain more subdued, as Brexit
uncertainty and slower global growth bite further on activity. For more detail
on our view of the outlook, see our economic
forecast.
Key findings:
- 23% of manufacturers reported
total order books to be above normal, and 32% said they were below normal,
giving a rounded balance of -10% (from -5% in April). This was the lowest
balance since October 2016, but still broadly in line with the long-run
average (-13%)
- 13% of firms said their
export order books were above normal, and 30% said they were below normal,
giving a rounded balance of -16% (from -5% in April) – broadly in line
with the long-run average of -17% but the lowest balance since July 2016
- 36% of businesses said the
volume of output over the past three months was up, and 23% said it was
down, giving a rounded balance of +14%. This rate of growth was broadly
steady on April (+11%) and quicker than the long-run average (+4%)
- Manufacturers expect output
to be broadly flat in the coming quarter, with 27% predicting growth, and
24% a decline, giving a balance of +3%
- Expectations for growth in
average selling prices for the coming three months (-1%) were at their
lowest balance since March 2016
- 35% of firms said their
present stocks of finished goods were more than adequate, whilst 9% said
they were less than adequate, giving a balance of 25% – the highest
balance since March 2009 and noticeably above the long-run average
(+13%).
