UK manufacturing output broadly unchanged in June quarter
Manufacturers in the UK reported that output volumes remained broadly unchanged in the three months leading up to June, according to the latest industrial trends survey released by the Confederation of British Industry (CBI) on Monday.
The stabilisation followed a rise in output for the first time in 18 months during the quarter to May, and looking ahead, manufacturers anticipated a modest increase in output over the next quarter.
Despite a notable improvement in total order books in May, the volume of export orders experienced a significant decline.
Both total and export orders were still reported to be below normal levels and their long-run averages.
Manufacturers indicated that stocks of finished goods were sufficient to meet expected demand, maintaining the same levels as the previous month.
Additionally, expectations for selling price inflation increased, with prices projected to rise at an above-average rate in the coming months.
The survey, which included responses from 248 manufacturers, highlighted that output volumes were unchanged in the three months to June, following an increase in the quarter to May, with a weighted balance of +3%, down from +14% previously.
Looking at the next three months, the outlook suggested a modest rise in output of +13%.
Notably, only four out of 17 sub-sectors saw output growth in the three months to June.
Growth was noted in the food, drink, and tobacco, motor vehicle and transport, and plastics and furniture and upholstery sub-sectors, which offset declines in other areas.
Total order books, while still below normal in June, showed significant improvement from the prior month, moving from -33% in May to -18% in June.
However, they remained slightly below the long-run average of -13%.
Export order books deteriorated further in June, falling from -27% in May to -39%, marking the weakest performance since February 2021 and falling below the long-run average of -18%.
Expectations for average selling price inflation rose in June, increasing from +15% in May to +20%, significantly higher than the long-run average of +7%.
Stock adequacy for finished goods remained stable, with a net balance of manufacturers reporting stocks as “more than adequate” at +14%, consistent with the long-run average.
“We’ve seen a stop-start recovery in manufacturing output in recent months, with higher activity over the last quarter concentrated in a relatively small number of manufacturing sub-sectors,” said the CBI’s lead economist, Ben Jones.
“But it’s encouraging to see that manufacturers remain confident the economy is heading in the right direction and our June survey suggests that the recovery should broaden out over the summer.
“One note of caution is that order books remain soft - the sharp deterioration in export order books is particularly striking and is something to keep an eye on in the coming months.”
Jones said the next government would be inheriting a challenging economic environment, and would need to have a credible plan to deliver sustainable growth.
“Now has to be the moment to focus on long-term solutions to tackle poor productivity and create an environment for business investment to accelerate.
“Top of the in-tray should be a cutting-edge trade and investment strategy, a net zero investment plan, and more support for firms to invest in automation and AI.
“At the same time, a focus on building momentum behind the ‘big three’ enablers of tax, planning and skills policies within the first 100 days can give firms a clear flight path for growth.”
Reporting by Josh White for Sharecast.com.