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Rate of growth in UKmfg slows but remains above average
Manufacturers’ output volumes growth slowed slightly 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.
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, added:“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 from the latest CBI Industrial Trends survey
• 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%).