UK manufacturing sector expands in May as export orders improve

THE UK manufacturing sector expanded again in May, as export orders improved, according to a new survey.

The CBI Industrial Trends Survey, which surveyed 501 manufacturers around the country, found that total order books were weaker than last month, but that they remain well above average.

Meanwhile, export order books were above average, matching February’s six-month high. The strength was reasonably broad-based, with export orders above average in 12 of the 18 sectors surveyed, while the gap between total and export order books narrowed sharply.

Growth in output volumes recovered from April’s 22-month low in May, but remained relatively modest. Expectations for the coming three months are at a similar level to the previous month, remaining somewhat above average.

Manufacturers’ expectations for price inflation are still subdued.

Rain Newton-Smith, CBI Director of Economics, said: “Things are looking up for our manufacturers, with growth continuing and export orders improving.

“Some of this could be down to an improvement in the Eurozone’s momentum – but the strengthening pound is still proving quite a challenge.

“To drive trade progress forwards, we want to see the new Government recommit to an ambitious, long-term export target to fully unlock the UK’s potential. Doing this will be vital to boosting investment, jobs and growth right across the country.”

Key findings of the latest survey:

•    34% of firms said the volume of output over the past three months was up and 25% said it was down, giving a balance of +9%. This is a recovery from April’s twenty-two month low (+4%) and was above average (+3%)
•    Businesses expect output to grow in the coming quarter, with 31% predicting growth, and 15% a decline, giving a rounded balance of +15%
•    20% of firms reported total order books to be above normal, and 24% said they were below normal, giving a rounded balance of -5%. This remained well above average (-15%)
•    15% of businesses said their export order books were above normal, and 22% said they were below normal, giving a balance of -7%. Following a sharp deterioration in March (-26%), May’s level was an improvement for the second month running, and the highest level since August 2014 (-3%)
•    Average prices are expected to be broadly flat over the next three months (+2%), after a slight fall had been anticipated in April (-3%)
•    14% of firms said their present stocks of finished goods are more than adequate, whilst 9% said they were less adequate, giving a balance of +5%. This edged down on April’s level (+7%).

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