Manufacturers expect output growth, though demand slackens says CBI

22 September 2011

UK manufacturers predict that production will continue to grow over the next three months, despite order book levels slackening during September, the CBI reports. Of 470 manufacturers responding to its latest monthly Industrial Trends Survey, 22% described total orders as above normal, and 31% said they were below. The resulting rounded balance of -9% indicates order book levels slipped back in September, though this measure remains well above its long-term average (-18%).

Perceptions of export order book levels also dipped, to the lowest level (-12%) since October 2010 (-21%). However, they also remain well above the long-term average (-21%).

Despite this, firms predict production will increase over the coming quarter. While 29% of manufacturers think output will rise in the next three months, 20% anticipate it will fall. The resulting balance of +9% remains above the long-term average (+6%), though part of a trend of slowing expectations since March’s peak (+27%).

Stocks were seen as high relative to demand in September. A balance of +21% of firms reported stock levels as more than adequate, which is above the long-term average (+14%), and the strongest balance since June 2009 (+22%).

Pricing pressures strengthened slightly but are significantly less intense than in the first half of the year. 24% of manufacturers predict that they will raise output prices over the coming quarter, and 10% expect to lower prices. The resulting rounded balance of +13% is slightly up from August's +9%, but remains much lower than the data seen in the six months to June.

Ian McCafferty (pictured), CBI chief economic adviser, says UK manufacturers are reporting some slackening in demand this month, following the volatility in financial markets and the slowdown in growth in our major trading partners. "As a result, firms now say stock levels are high relative to expected demand," he said "Nevertheless, UK manufacturers remain optimistic that production will continue to grow over the coming three months.”