CBI’s quarterly survey reveals flat orders and stable output

Manufacturing orders were flat in the three months to January, while output was stable for the second quarter in a row, according to the CBI’s latest quarterly Industrial Trends Survey.

Both orders and output are expected to rise moderately over the next three months, and the employment and investment picture continues to look relatively positive.

Of the 389 manufacturers responding to the survey, 25 per cent reported that total new orders had risen, while 28 per cent said they fell. The resulting rounded balance of -4 per cent disappointed expectations of growth (+8 per cent), but the rate of decline in orders was slower than in the previous quarter (-13 per cent).

Within total orders, export orders continued to fall for the third consecutive quarter (-13 per cent compared with -17 per cent in the previous quarter), against expectations that they would stabilise. However, manufacturers anticipate a resumption of growth in export orders in the coming three months (+7 per cent), underpinning fairly robust expectations for total orders (+14 per cent).

Output growth underperformed against expectations once again and was broadly flat for the second consecutive quarter (-2 per cent). Manufacturers expect to raise output in the next quarter (+8 per cent), although this represents the lowest expectation since October 2011 (-11 per cent).

While optimism regarding the business situation was unchanged (zero per cent), businesses remained concerned about export prospects for the year ahead (-11 per cent). In addition, 56 per cent of companies cited price competition from overseas competitors as a factor likely to limit export orders in the next three months. This is the highest proportion since July 2008 (58 per cent), although still a little below average (59 per cent). Concerns around political and economic conditions abroad also remained high (31 per cent).

According to the CBI, 81 per cent of businesses identified orders or sales as a factor likely to limit output in the next three months — the highest proportion since April 2010 (82 per cent). Furthermore, 62 per cent of manufacturers cited concerns that uncertainty about demand could limit capital expenditure authorisations over the next year — the highest since April 2009 (66 per cent).

However, employment and investment indicators were more positive. Numbers employed were flat (+2 per cent), beating slightly negative expectations (-4 per cent) with manufacturers expecting to increase headcount in the coming three months (+13 per cent).

Investment intentions for the year ahead for plant and machinery improved on the previous survey. A balance of +6 per cent of companies expect to spend more in this area, against the long-run average of -9 per cent. Meanwhile, the balance of respondents intending to invest more in product and process innovation remained high at +24 per cent (long-run average +10 per cent).

Domestic prices picked up in this quarter (+7 per cent) and the rate of inflation is expected to accelerate further in the coming three months (+21 per cent), driven by the food, drink and tobacco sector. However, manufacturers’ export prices fell for the second consecutive quarter (-5 per cent).

Average unit cost growth saw little change from the last survey (+21 per cent from +20 per cent) and is expected to continue on this path in the next three months (+23 per cent).

Stocks of finished goods (+5 per cent) and raw materials (+4 per cent) rose a little, but are expected to level off in the next quarter (-1 per cent and -5 per cent respectively).