Manufacturing output and orders remain robust

Manufacturing output growth eased in the three months to August, according to the latest monthly CBI Industrial Trends Survey.

The survey of 379 manufacturers revealed that output growth slowed slightly in the three months to August but remained well above the long-term average.

13 out of 17 sub-sectors reported growth and manufacturers said they expect output growth to continue at a similarly firm pace over the next three months / Picture: Getty/iStock

Output growth remained broad-based, with 13 out of 17 sub-sectors reporting growth, driven by the food, drink and tobacco sector. Manufacturers expect output growth to continue at a similarly firm pace over the next three months.

While total order books faded slightly compared with the previous month, they were still comfortably above the long-run average. Export orders remained strong and well above the long-run average.

Meanwhile, expectations for output price inflation remained steady, and broadly similar to those seen over the past six months.

While we expect UK manufacturers to continue benefitting from healthy external demand and a lower sterling exchange rate, overall economic growth is expected to remain subdued, reflecting weak household income growth and investment being held back by ongoing Brexit uncertainty. For more detail, see our June economic forecast.

Anna Leach, CBI Head of Economic Intelligence, said: “Manufacturing growth remains strong, supported by the lower level of sterling and strong global economy. But risks to that growth remain high in light of international trade tensions and the uncertainty caused by Brexit. Firms will be keen to see urgent progress on the Withdrawal Agreement to lock in transition, which is crucial to continuing frictionless trade as the UK leaves the EU.

“Make no mistake, a ‘no deal’ scenario would be immensely damaging not just for UK manufacturers, but also the rest of the EU. So both sets of negotiators need to demonstrate flexibility and compromise to protect trade flows worth 600 billion euros each year, particularly against the backdrop of increasing protectionist rhetoric.”

Key findings from the latest monthly Industrial Trends Survey

• 31% of manufacturers reported total order books to be above normal, and 23% said they were below normal, giving a rounded balance of +7%
• 24% of firms said their export order books were above normal, and 15% said they were below normal, giving a balance of +9%
• 39% of businesses said the volume of output over the past three months was up, and 18% said it was down, giving a balance of +21%
• Manufacturers expect output to grow at a similar pace in the coming quarter, with 32% predicting volumes to increase, and 13% expecting a decline, giving a rounded balance of +20%
• 17% of companies expect average selling prices to increase in the coming three months, with 2% predicting a decrease, giving a balance of +15% (compared with +13% in July)
• 12% of firms said their present stocks of finished goods were more than adequate, whilst 12% said they were less than adequate, giving a balance of 0%, below the long-run average.