Manufacturing growth and optimism weaken, CBI says

Manufacturing growth slowed in the three months to April as optimism among factory managers weakened, the CBI reported.

Asked if output volumes were up or down, 30% of manufacturers surveyed reported a rise and 17% said output was down, the CBI said. The balance of +13% was higher than the long-run average of +2% but down on the previous quarter’s figure of +21%.

The employers group said that when asked about the general business climate, 20% of manufacturers said they were optimistic and 24% were gloomier. The net balance of -4% was a drop from +13% in the previous three months.

New orders rose but domestic orders were little changed, registering the lowest growth for two years. Export orders grew slightly quicker than the previous quarter, the survey of 356 manufacturers found.

Manufacturers gave mixed signals about the sector’' prospects. Growth in new orders is expected to slow in the following quarter with domestic orders stable while overseas demand slows. Output is expected to grow at a faster pace.

The CBI said despite the slowdown conditions were still good for manufacturers. The lobby, which campaigned against Brexit, said UK factories needed continued access to the EU market to keep flourishing.

Rain Newton-Smith, the CBI’s chief economist, said: "Although manufacturing growth has slowed again this month, manufacturers continue to enjoy the fruits of stronger growth in Europe and the lower pound. For manufacturing to continue its resurgence in the years ahead, it will be critical for trade to remain as frictionless as possible with the EU - our closest and biggest trading partner."

UK manufacturers have benefited from the strong global economy and the reduction in the value of the pound, which has made their goods more competitive. While factory output has grown, domestic consumption has suffered as prices of imported food and other goods have risen.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said Brexit doubts were holding back manufacturing investment and that the government's reiteration of its aim of leaving the customs union would not help.

"Until the government does a U-turn, manufacturers likely will continue to hoard cash. The risk, therefore, that the manufacturing sector’s recovery fizzles out towards the end of this year is high," Tombs said.