Manufacturing activity remains poor – warns CBI

Latest News Tue, Sep 22, 2020 11:24 AM

Manufacturer output volumes in the three months to September fell at a slower pace than in August, according to the latest CBI monthly Industrial Trends Survey.

The survey of 277 manufacturers found that output volumes declined in 10 of 17 sub-sectors – compared with 16 sectors reporting a fall last month - with the headline drop in output driven by the motor vehicles & transport equipment sub-sector.

For the first time since April, there was no improvement in overall order books, in September, with both total and export order books remaining far weaker than their long-run averages.

Looking ahead, firms anticipate that output will fall at a slower pace over the next three months. Manufacturers also expect output prices in the next three months to flatten.

Anna Leach, CBI Deputy Chief Economist, said: “While it’s good to see that output volumes once again fell at a slower pace this month compared to August, it is disappointing to see the modest improvements in order books stall, with demand at a still weak level.

“As manufacturing firms continue to battle against headwinds from a resurgence of the virus, weak global demand and uncertainty over our trading relationships, the Government must step up its support.

“As the Job Retention Scheme comes to an end, a successor must be found, while a deal with the EU will help underpin businesses’ resilience.”

Tom Crotty, Group Director at INEOS and Chair of the CBI Manufacturing Council, said: “Manufacturers have endured a very difficult summer and these weak activity figures are, therefore, not surprising. Firms across the country are facing considerable uncertainty as the end of the Job Retention Scheme nears, and concerns about the potential for a no-deal Brexit have escalated as negotiations remain in stalemate.

“A solution to avoid a JRS cliff-edge would be a welcome boost to manufacturers continuing to deal with the impact of Covid-19. It is also crucial that a deal is agreed with the EU, as it is essential to support the economic recovery across the UK.”

Key findings:

Output
• Output volumes in the three months to September (-20%) fell at a slower pace than in August (-46%)
• Output dropped in 10 out of 17 sub-sectors, with the headline decline driven primarily by the motor vehicles & transport equipment sub-sector
• Manufacturers expect the decline in output to ease further in the next three months (-6%)

Order books
• Total order books (-48%) deteriorated slightly on August (-44%), and remained significantly below their long-run average (-14%)
• Export order books (-56%) strengthened slightly from August (-60%) but continue to be far below their long-run average (-18%)
Prices
• Manufacturers expect output prices to be broadly flat in the next three months (-1% from -5% in August).

Stocks
• Stock adequacy (+6% from +21% in August) weakened below its long-run average (+13%)

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