Manufacturing recovery gathers pace says CBI

MANUFACTURING companies are at their most bullish over prospects for growth in a year, but say they expect to have to raise prices significantly.

The Industrial Trends survey of more than 430 manufacturers by the CBI reveals that 39% believe that output would rise in the next three months, while 15% expected that it would fall. The resulting balance of +24% is the strongest since March 2011 (+27%).

Order books in March remained well above their long-run average, and their levels of late last year, albeit a little lower than last month.

While 18% reported total orders were above normal, 26% said they were below. The resulting balance of -8% is stronger than the long-run average for this measure (-17%).

Similarly, at -11%, export demand also weakened, but remained considerably above its long-run average (-21%).

However, expectations for output price inflation have picked up. A balance of +24% of firms expect to raise output prices in the coming quarter, the highest since June 2011 (+27%).

Ian McCafferty, the CBI’s chief economic adviser, said: ““The recovery in the manufacturing sector seems to be building some momentum. Firms again expect a strong rise in output over the next three months, on the back of above-average order books.

“However, expectations for output price inflation have also moved higher, most probably reflecting the recent rise in oil prices.

“Any further rise in oil prices would be a significant concern, given the additional cost burden this would place on UK manufacturers and the knock-on effects it could have on the nascent recovery.”