UK manufacturers' export orders hit two-year high in August, CBI says

Sterling's fall in value drove UK manufacturers' export order books to multi-year highs, the results of a widely-followed survey revealed, even as they prepared to raise prices in a bid to pass-on their own now higher costs.

The Confederation of British Industry's gauge of export orders hit its highest mark since August 2014, at -6%, according to the business lobby group's Industrial Trends survey.

Nevertheless, some economists remained unconvinced.

The Confederation of British Industry's total orders index slipped slightly from a reading of -4 in July to -5.

That was better than the print of -10 expected by the consensus, as 19% of businesses reported total orders were above normal in August, versus the 18% who reported the same the month before.

Volumes of output were also lower at 11%, down from 16% in the month before but even so ahead of the 6% expected by economists.

The survey's sub-index referencing companies' expectation for their average prices over the next three months came in at +8%, its highest since February 2015 and up from +5% in July.

Of the companies canvassed by CBI, 17% expected to raise prices and 8% to cut them.

Output growth was projected to remain steady over the following three months, CBI said.

Anna Leach, CBI Head of Economic Analysis and Surveys, said: “It’s good to see manufacturing output growth coming in stronger than expected, and some signs that the fall in sterling is helping to bolster export orders. But the pound’s weakness is a double-edged sword, as it benefits exporters but also pushes up costs and prices.

Manufacturers will welcome the new government’s focus on industrial strategy as well as the Chancellor’s recent guarantee over EU funding, which will help to provide certainty for universities and businesses investing in innovation and research and development.

“The most significant effects of the vote to leave the EU will flow over the medium to long-term. Therefore firms need to see ambitious decisions in the Autumn Statement that will secure the UK’s economic future as changes to trade, regulation and access to skills loom on the horizon.”

For his part, Samuel Tombs, chief UK economist at Pantheon Macroeconomics said: "August’s CBI Industrial Trends Survey suggests that rising export orders are cushioning the blow to manufacturers from the slump in domestic demand, but we would caution against placing much weight on this erratic survey."

"The relatively upbeat tone of August’s CBI Industrial Trends Survey gives us another reason to be tentatively optimistic about the extent to which the economy has taken a hit from the referendum outcome," said Paul Hollingsworth, UK economist at Capital Economics.