Manufacturing activity picks up in February says CBI

ACTIVITY levels in the UK manufacturing sector picked up during February – with latest predictions forecasting additional growth in output over the next three months.

The latest CBI Industrial Trends Survey, which analysed responses from 522 manufacturers around the country, found that total order books strengthened on already robust levels, climbing to a six month high.

Export orders also rallied this month, to a level well above average, regaining some of the ground lost towards the end of last year. However, they still lag behind more robust domestic orders.

Growth in output volumes rose in February, reaching their highest level for seven months, and 16 of the 18 sectors anticipate growth in the coming quarter.

The survey shows manufacturers expect a modest rise in selling prices over the next three months, although expectations for price inflation remain moderate on the whole.

Rain Newton-Smith, CBI Economics Director, said: “Our manufacturers have more of a spring in their step this month, regaining some of the momentum lost towards the end of last year.

“The drop in oil prices is good news for the manufacturing sector in the UK, bringing with it lower operating costs, but North Sea producers are clearly suffering.

“Export orders picked up significantly, to a level not seen for six months, but uncertainty over prospects in the Eurozone will continue to weigh on export demand. So, it’s imperative we continue to help manufacturers sell their products and services into high-growth markets around the globe.”

Key findings:

•    40% of firms said the volume of output over the past three months was up and 23% said it was down, giving a balance of +17%. This brought the pace of growth to levels last seen in mid-2014
•    Businesses expect output to grow in the coming quarter, with 36% predicting growth, and 12% a decline, giving a rounded balance of +25%
•    26% of firms reported total order books to be above normal and 16% said they were below normal, giving a balance of +10%. This was well above the long run average (-16%)
•    13% of businesses said their export order books were above normal, and 21% below normal, giving a balance of -8%. Although remaining weaker than overall orders, they were above the historical average of -20%, and at their highest level since August 2014 (-3%)
•    Output price inflation expectations for the next quarter (+8%) rose to their highest since April 2014 (+9%). The food & drink sector is the largest contributor to the expected price growth
•    14% of firms said their present stocks of finished goods are more than adequate, whilst 8% said they were less than adequate, giving a rounded balance of +5%. This was below the long-run average (+14%).

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