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Strong outlook for manufacturing sector

Hydrocarbon Engineering,

According to the latest CBI Industrial Trends Survey, activity in the UK manufacturing sector remained strong in May.

Manufacturing outputs continued to grow at the same rate as in the previous two months. Stronger growth is expected in the next quarter, with output continuing to rise over the course of the next three months.

The survey of 437 manufacturers found that total order books remained well over the long run average. Export orders fell below normal, mainly driven by the chemicals and automotive sectors, but remained strong by historical standards.

Other key findings include:

  • 36% of firms said the volumes of output of the last three months was up and 21% said it was down, giving a balance of +15% for the third consecutive month. This was well above the average of +2%.
  • Firms expect output to grow in the coming quarter, with 39% anticipating growth. Only 7% predict decline, giving an overall balance of +32%. This is unchanged since April and, if realised, would be the highest balance since September (+33%).
  • 22% of firms reported that total order books were above normal and 22% said they were below normal, giving a balance of 0%. This was similar to April figures (-1%) and significantly above the long run average (-16%).
  • 19% of firms said that their export order books were above normal and 28% said they were below normal, giving a rounded balance of -9%.
  • Output price expectations moderated (+4%), compared with April (+9%).
  • 16% of firms said that their present stocks of finished goods were more than adequate, and 8% reported that they were less than adequate, giving a balance of +8%.

Katja Hall, CBI Deputy Director-General, commented: “Overall, the manufacturing sector continues to perform well. Output growth is on an upward trend, with firms expecting an even stronger rise in the next three months.

“Inflationary pressures are under control, with firms now expecting only a slight rise in the selling prices of goods.

“The recent rise in Sterling, coupled with a tepid recovery in the Eurozone could weigh on export demand. As the UK’s economic recovery gains a firmer footing, we need to ramp up manufacutirnf exports to high growth markets, driving job creation here in the UK”.

Adapted from a press release by Emma McAleavey.

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