Manufacturing is 'holding up', says the CBI

23 August 2011

UK manufacturers are reporting healthy order books and expectations for output growth are above their long-run average, the CBI has reported. Meanwhile, pricing pressures have eased following strong inflation during the first two quarters of this year. Of the 510 manufacturers responding to the CBI’s August monthly Industrial Trends Survey, 29% of firms described total orders as above normal, and 29% said they were below.

The resulting rounded balance of +1% shows order books remain well above the long-term average of -18%, and is an improvement on the previous month’s balance of -10%.

While 24% of firms said export order books were above normal, an equal 24% said they were below. The resulting balance of 0% compares with -8% in July, and is also significantly above the long-term average (-21%).

Expectations for growth in factory output over the coming quarter have picked up a little. 31% of firms predict that production will rise in the next three months, and 17% anticipate that it will fall. While the resulting rounded balance of +13% remains above the long-term average (+6%), it represents a continuation of the broader trend of moderating expectations since April.

Pricing pressures have eased in comparison with the first half of 2011 and remain fairly modest. 19% of manufacturers predict that they will raise output prices over the coming quarter, and 10% expect to lower prices. The resulting balance of +9% is considerably lower than the much stronger expectations seen in the months prior to July.

Furthermore, a balance of +14% of firms reported stock levels to be more than adequate, which is in line with the long-term average (+14%), and is the highest balance since December 2009 (+15%).

Richard Woolhouse, CBI Head of Fiscal Policy, said: “Manufacturing order books are holding up, and expectations for output growth are above their historical average, although they are less strong than earlier this year.

“Inflationary pressures have eased since the start of the year, with fewer firms predicting they will have to raise prices at the factory gate over the coming quarter.

“But the risks to manufacturing activity and business confidence have if anything increased, due to market volatility and the recalibration of growth expectations worldwide. Concerns around growth in the US and the Euro area present further challenges to the manufacturing recovery.”