Business buoyancy maintained by domestic and overseas orders
Business optimism among manufacturers is improving on the back of strong growth in orders at home and abroad, according to the latest CBI quarterly Industrial Trends Survey.
The survey of 405 manufacturers found that in the three months to April 2014, growth in total order books and domestic orders was the fastest since 1995. According to the CBI, export orders grew strongly, while investment intentions for the year ahead remained particularly robust. Output growth was solid again for the second consecutive quarter, while numbers employed rose at the strongest rate since October 2011.
According to the survey, firms are upbeat about the next quarter, with growth expectations for domestic orders and output also the highest since the 1970s. Optimism about export prospects for the year ahead also rose strongly.
Signs of a continued recovery in the manufacturing sector appear to be feeding through to investment plans over the next 12 months, with plans for capital expenditure on plant and machinery (relative to last year) the highest for 17 years. Investment plans for innovation and training and retraining also remain robust.
Key findings – three months to April 2014:
- 41 per cent of businesses said they were more optimistic about the general business situation than three months ago and 8 per cent less, giving a balance of +33 per cent, the highest since April 1973 (+41 per cent)
- 38 per cent of businesses reported an increase in total orders and 17 per cent a decrease, giving a balance of +21 per cent, the highest since April 1995 (+27 per cent)
- The balance for new domestic orders (+17 per cent) was also the highest since April 1995 (+17 per cent), while the balance for new export orders (+16 per cent) also represented strong growth
- 32 per cent of firms reported a rise in output volumes and 17 per cent a decline, giving a balance of +15 per cent, while growth in numbers employed remained robust (+18 per cent)
- Domestic and export output prices were little changed this quarter (+4 per cent and +1 per cent respectively). Average unit costs rose (+13 per cent), for the second quarter running.
Key findings – next quarter:
- 36 per cent of manufacturers expect total new orders to increase and 10 per cent expect them to fall, giving a balance of +26 per cent, the highest since October 1996 (+27 per cent)
- A balance of +26 per cent expect new domestic orders to rise (34 per cent expect an increase and 8 per cent a fall), the highest since April 1977 (+29 per cent) and +22 per cent expect new export orders to go up (33 per cent expecting an increase and 11 per cent a fall)
- 41 per cent of firms anticipate a rise in output volumes and 10 per cent a fall, giving a rounded balance of +32 per cent. 27 per cent expect employment to increase and 11 per cent expect it to decline, giving a balance of +16 per cent
- A modest rise in domestic output prices is expected (+9 per cent), alongside another rise in unit costs (balance of +10 per cent)
- Manufacturers’ investment intentions for the year ahead compared with the previous 12 months improved sharply for plant & machinery (to +16 per cent from +4 per cent). They also remained robust for product & process innovation (+27 per cent) and training (+26 per cent)
- The number of firms citing uncertainty about demand as a constraint on investment edged lower to 43 per cent, the lowest since October 2010 (41 per cent)
- The number of firms seeing political/economic conditions abroad as a constraint on export orders in the coming three months fell for a fourth consecutive quarter to 22 per cent, the lowest since October 2011 (20 per cent).