SME manufacturer confidence on the rise, says CBI

Small and medium enterprise (SME) manufacturers saw business optimism bounce back in the three months to October as export demand rose following the fall in sterling, according to the Confederation of British Industry (CBI).

According to the organisation's SME trends survey sentiment around the general business situation rebounded slightly whilst export optimism for the next 12 months rose at the fastest pace in over two years.

Record high expectations for export orders growth has pushed up firms’ anticipation for new orders growth in next quarter. Stock levels remained stable and raw materials rose slightly.

The proportion of firms reporting political or economic conditions abroad as a factor likely to limit export orders however remains higher than pre-referendum levels and well above its long run average.

CBI’s panel expects new domestic orders to remain flat as they have over the last quarter whereas new export orders are expected to experience record growth over the next three months.

The staggering pound has however bumped up average unit costs at the fastest pace since April 2013, and are expected to rise further and feed into average domestic prices.

Domestic output prices changed only slightly for the second quarter running but are expected to rise over the coming quarter with inflation expectations at their highest in two years. Export prices were stagnant over the three months and are expected to remain unchanged in next quarter.

Investment intentions have also improved since their post-referendum decline but still remain short of pre-referendum highs.

The number of firms citing labour shortages as a constraint to capital spending has picked up to its highest levels since January 1989, but were similar to levels seen in 2007. Meanwhile the numbers employed grew marginally in the three months to October at the slowest pace since January 2017.