CBI: demand improves for UK-made goods but output growth is expected to ease

18 November 2010

The CBI says demand for UK-made goods improved in November, compared with the previous month, but manufacturers also expect prices to rise faster in the next three months, and predict slower growth in manufacturing output. Total and export order books improved relative to October, although they were still considered to be ‘below normal’.

Responding to the CBI's latest monthly Industrial Trends Survey, 21% of manufacturers said that total orders were above normal and 36% said they were below. The resulting balance of -15% is considerably better than last month (-28%) and slightly better than the survey’s long-run average (-18%). The figure marks a return to the level of demand seen during the summer months.

Firms also reported that export order books were better than in October, even though they were still considered below normal. In November, 22% of companies said they were above normal and 29% below normal. The resulting balance of -7% is up on -21% in October, and above the long-run average (-22%).

Manufacturers expect modest growth in output in the next three months. In November’s survey, 26% predict output will rise, compared with 22% expecting it will fall. The resulting balance of +4 is down on previous months, and the weakest figure since January. However, this figure is broadly in line with the long-run average of +5%.

Partly reflecting recent rises in oil and other commodity prices, inflationary pressures have intensified for UK manufacturers in the November survey. A balance of +17% of firms expect to raise prices in the next three months, following +6% in the previous survey, but this is more in line with the expectations seen in September (+15%).

Commenting on the survey results, CBI Chief Economic Adviser, Ian McCafferty (pictured) said: “Manufacturing demand improved in November, following October’s more negative figures for total and export orders. Demand is now back in line with that over the summer months, suggesting that particularly weak order book readings last month may have been a one-off.

“Factory output is still set to rise, albeit with modest expectations for growth compared with recent months, as the boost from re-stocking starts to fade.

“Inflationary pressures are a concern, with companies saying they will be increasingly forced to pass on at least part of their rising costs in the form of higher prices.”