Manufacturing output stable in latest quarter, CBI survey reveals

The manufacturing sector’s output was stable in the three months to April, according to the CBI’s quarterly Industrial Trends Survey on Monday.

Total new orders fell at 25% of the 472 manufacturers surveyed while 21% of business reported an increase, leading to a balance of -4%, the same level as the previous quarter.

CBI said the balance of total new orders reflected a drop in export orders to a balance of -7% from -2% and a slight rise in the balance for new domestic orders to -2% from -3%.

The number of people employed rose to a balance of +5 in the latest quarter from +3 in the three months to January.

Average unit costs increased at the fastest pace in two years to a balance of +8% compared to the previous quarter’s -6%. CBI said firms found it difficult to pass on increased costs as domestic and export prices continued to fall.

Optimism among manufacturing businesses decreased slightly to a balance of -5% from -4% the previous quarter, with 14% of firms saying they were more confident during the period and 19% saying there were less positive.

Looking ahead to the next quarter, 27% of manufacturers expect total new orders to increase and 13% expect them to fall, meaning the balance jumped to +14% in the quarter to April from +8% in the quarter to January.

The number of firms citing political and economic conditions abroad as a constraint on export orders in the coming three months climbed to +31% from +25% in the last quarter.

“Manufacturing has yet to pick-up after a flat start to the year, with falling orders providing little impetus for production,” said Rain Newton-Smith, CBI director of economics.

“While expectations for the upcoming quarter are encouraging, manufacturers are still facing sizeable external headwinds.”

Newton-Smith said the falling exchange rate should provide some support to manufacturers and investment intentions “are strong”.

She added that firms are likely to considering increasing capacity as exports are expected to pick up.

Separate figures from CBI showed its headline total orders balance for April improved from –14 to -11, compared to consensus forecasts of -15.

It marked a four-month high but remained below its post-crisis average of around -7, analysts pointed out.

“This may be a sign that sterling’s marked overall weakening in recent months is starting to feed through to support foreign demand,” said Howard Archer, chief European and UK economist at IHS Global Insight.

“The hope for UK manufacturers is clearly that they will increasingly be helped by the substantial overall weakening of the pound so far in 2016 and also by still low oil and commodity prices that maintain their ability to price competitively.”