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Manufacturing orders 'strongest since April 2011'

21 January 2014

Growth in new manufacturing orders was the strongest since April 2011, according to the latest CBI quarterly Industrial Trends Survey.

Stephen Gifford

In the three months to January 2014, domestic orders rose, uncertainty about demand fell and investment intentions for the year ahead picked up.

The survey of 367 manufacturers found that growth in total order books and domestic orders was the most rapid since April 2011. Output growth remained solid, albeit slightly lower than that recorded in November and December.

Manufacturers are optimistic about continued expansion in the next quarter, with expectations of growth in new orders at its strongest since April 2012.

Manufacturing companies are increasingly confident in the recovery, which is feeding through to investment plans. Optimism about business conditions rose strongly, while the number of firms feeling that demand uncertainty was constraining investment dropped back sharply. Firms’ plans for growth in capital expenditure on buildings in the year ahead were the highest in three years.

The CBI's director of economics, Stephen Gifford (pictured) said the recovery in the manufacturing sector is continuing to build and confidence has improved. “Growth in the volume of total new orders has reached its highest rate since April 2011, and this is encouraging," he said. "However, now is not the time to relax and take our foot off the gas. There are still risks ahead and our manufacturers need help to break into high-growth export markets."

Key findings – three months to January 2014:
- 31 percent of businesses said they were more optimistic about the general business situation than three months ago and 10 percent less, giving a balance of +21 percent, little changed from October’s 18 month-high of +24 percent.

- 34 percent of businesses reported an increase in total orders and 21 percent a decrease, giving a balance of +13 percent, the highest since April 2011 (+20 percent).

- The balance for new domestic orders (+11 percent) was the highest since April 2011 (+15 percent), but the balance for new export orders (0 percent) was down on the three months to October (+3 percent).

- 38 percent of firms reported a rise in output volumes and 20 percent a decline, giving a balance of +18 percent. This is weaker than the +29 percent balances recorded in November and December, but still well above the long-run average of +2 percent.

- Domestic and export output prices changed little this quarter (+2 percent and -4 percent respectively) while unit costs grew a little (+7 percent).

Key findings – next quarter:
- 38 percent of manufacturers expect total new orders to increase and 16 percent expect them to fall, giving a balance of +22 percent, the highest since April 2012 (+24 percent). A balance of +12 percent expect domestic orders to rise (27 percent expect an increase and 15 percent a fall) and +14 percent expect export orders to go up (28 percent expect an increase and 14 percent a fall).

- 39 percent of firms anticipate a rise in output volume and 16 percent a fall, giving a balance of +23 percent. 28 percent expect employment to increase and 14 percent expect it to decline, giving a balance of +14 percent.

- Expectations for growth in domestic output prices are the strongest in a year. 29 percent of firms expect to raise prices and 8 percent to reduce them, giving a balance of +20 percent. A rise in unit costs is also anticipated (balance of +7 percent).

- Manufacturers' investment intentions compared with the previous 12 months improved sharply for buildings (to -1 percent from -20 percent, highest since January 2011) and plant & machinery (to +4 percent from -8 percent). They also remained robust for product & process innovation (+20 percent against an average of +11 percent) and training (+26 percent against an average of +12 percent).

- The number of firms citing uncertainty about demand as a constraint on investment fell sharply from 59 percent to 45 percent, the lowest since October 2010.
- 65 percent of firms saw orders or sales as a potential constraint on output in the coming three months, the lowest since July 2012.

- The number of firms seeing political/economic conditions abroad as a constraint on export orders in the coming three months fell for a third-consecutive quarter to 27 percent, the lowest since July 2012 (22 percent).


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