CBI hails encouraging trend in manufacturing
THE MANUFACTURING sector saw output rise at the fastest rate in 15 years in the three months to July, as demand for UK-made goods continued to strengthen and firms rebuilt their stocks, according to a CBI survey.
However, the employers’ organisation said the pace of manufacturing growth is expected to be slower in the coming quarter.
Of the 439 manufacturers that responded to the Quarterly Industrial Trends Survey, 38% said output rose during the last quarter, while 15% said it fell. The resulting rounded balance of +24% is the fastest growth since April 1995 (+26%), and a marked improvement on the previous quarter’s flat performance (+1%).
A strong rise in home-grown orders helped boost output. 29% of firms said the volume of domestic orders rose and 19% said they fell, giving a balance of +10%, the strongest since April 2004 (+12%).
Overseas demand was buoyant with 28% of firms reporting a rise in export order volumes, and 11% a decline, giving a rounded balance +18%.
As a result, the volume of total new orders, which reflects combined domestic and overseas orders, rose (+18%).
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The rise in output was also driven by a shift in the stock cycle, which saw firms building up inventories of raw materials and finished goods.
Looking ahead to the next three months, manufacturing output is expected to rise again, although at a slower pace (+6%), as growth in domestic and export orders is expected to moderate. The balances for expected domestic and export orders are +4% and -3% respectively.
Ian McCafferty, the CBI’s Chief Economic Adviser, said: “With demand for UK-made goods at home and abroad having strengthened, manufacturing production really stepped up a gear during the past three months. Output was also boosted by firms taking action to rebuild stocks.
“Looking ahead, production is expected to rise further, but at a more moderate rate. In our view the risk of a double-dip recession remains low and the fortunes of the manufacturing sector are continuing to slowly and steadily improve.”
Sentiment about the overall business situation and export prospects are continuing to improve with a balance of 10% more optimistic than three months ago.
Access to credit and finance appears to be improving with the percentage of firms citing it as a constraint to output and export orders having fallen to pre-recession levels.
