UK manufacturing output growth slows but remains strong – latest data

By Terry Irwin |
Categories: Economy, Manufacturing
Tagged With: ,

Manufacturing order books weakened in the three months to March 2018, but remained well above their long-run average, according to the latest monthly Industrial Trends Survey by the Confederation of British Industry (CBI).

According to the survey of 381 manufacturers, export order books remained unchanged and above the long-run average. Output continued to grow robustly in the three months to March, but at a slower pace than in the three months to February.

Output growth was broad-based, increasing in 14 out of 17 manufacturing subsectors. Growth was predominantly driven by motor vehicle and transport equipment, chemicals, and electronic engineering. Respondents expect that output growth will slow further over the next three months, matching the pace seen in November and December 2017.

Expectations for output price inflation continue to weaken, but remain above the historical average. Meanwhile, stocks were considered to be above adequate levels, moving above the long-run average for the first time since September 2016.

B2C companies will continue to struggle

Looking ahead, strong global demand and the lower pound will continue to underpin demand for the manufacturing sector. But the CBI expects consumer-facing companies and retailers to continue to struggle while household incomes remain under pressure from higher inflation.

Across the economy more broadly, the CBI expects growth to remain subdued over the coming quarters, in line with 2017 performance. For more detail on this, see the CBI’s December economic forecast.

Confidence boosted by transition deal agreement

Anna Leach, CBI Head of Economic Intelligence, commented: “Robust global growth and the low pound have gifted UK manufacturers a strong first quarter in 2018. Although total order books and output growth slipped relative to February, demand and output growth remain well ahead of long-run averages.

“Confidence among manufacturers will have been given an additional boost by the agreement of a transition deal, giving them the confidence to continue investing and planning for growth. Other hurdles on the Brexit path need to be cleared in the same spirit – this includes a speedy agreement of a mutually beneficial trade deal for both the UK and the EU, with a customs union one of the options on the table.”

“Sector is still in limbo”

According to Tom Crotty, Group Director of Ineos and Chair of the CBI Manufacturing Council, “A buoyant global economy and the low pound continue to work their magic on demand for UK manufactured goods. But while the agreement of a transition deal on Monday is welcome, the sector is still in limbo. Swift progress is needed on a deal which preserves barrier-free access to the EU market, and allows manufacturers to access the people and skills that they need from the Continent.”

Key findings from the survey

  • 29% of manufacturers reported total order books to be above normal and 25% said they were below normal, giving a balance of +4%. This was- above the negative long-run average of -14%.
  • 19% of firms said their export order books were above normal and 10% said they were below normal, giving a rounded balance of +10% This was above the negative long run average of -18%.
  • 38% of businesses said the volume of output over the past three months was up and 22% said it was down, giving a balance of +16% – above the long run average of +4%.
  • Manufacturers expect output growth to slow in the coming quarter, with 34% predicting an increase in volumes and 21% expecting a decline, giving a balance of +13% – above the long-run average of +9%.
  • 24% of companies expect average selling prices to increase in the coming three months and 6% predicting a decline, giving a balance of +18% – above the long-run average of +2%.
  • 27% of firms said their present stocks of finished goods were more than adequate, while 7% said they were less than adequate, giving a balance of +20% – above the long run average of +13%.

Is higher inflation affecting your business? For advice on coping strategies, email me or call me on 020 7099 2621.

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