UK manufacturers anticipate growth in output

Manufacturers continue to expect strong output growth in the next three months, according to the CBI’s latest monthly Industrial Trends Survey.

But the survey of 404 firms found that output growth was broadly flat over the three months to May, again disappointing expectations for a more pronounced recovery.

However, the outlook is again much brighter for the next quarter, with output volumes expected to rise strongly – expectations have been elevated for three months. Twelve of the sixteen sectors anticipate a pick-up, with food, drink & tobacco, and mechanical engineering sectors being the key contributors to growth.

Total orders and export orders edged up a little and were broadly in line with their long-run averages. Meanwhile expected price inflation has fallen back to its lowest since last September.

Key findings:

  • 13 per cent of firms reported order books above normal (excluding seasonal variations), and 33 per cent below, giving a balance of -20 per cent, broadly in line with the long-term average of -17 per cent and slightly above reported orders in April (-25 per cent)
  • 10 per cent of firms reported export order books above normal, and 28 per cent below, giving a rounded balance of -17 per cent, broadly in line with the long-term average of -21 per cent and slightly up on April (-21 per cent)
  • Output was broadly flat over the last three months, with 28 per cent of firms reporting volumes up and 27 per cent down. The balance of +1 per cent is the first time since January that output growth has deteriorated on the previous month (+5 per cent). Firms producing consumer goods were the main drivers of growth, with the food, drink & tobacco, and paper, printing & media sectors making the strongest contribution
  • Output is expected to rise sharply over the next three months – this is the third consecutive month of elevated output expectations. Some 33 per cent of firms predict increases and only 15 per cent expect falls, giving a balance of +18 per cent. The anticipated acceleration is broad-based – twelve of the sixteen sectors expect a pick-up, but it is driven primarily by food, drink & tobacco, and mechanical engineering sectors
  • Average price growth over the next three months is expected to fall back with 12 per cent of firms reporting prices rising, and 8 per cent predicting drops. The balance of +4 per cent is the lowest since September 2012 (+3 per cent), and driven by five of the six largest sectors in the survey, including metal products, where price expectations are at their lowest since July 2009