Manufacturing demand strengthens

Manufacturing firms reported that both their total and export order books had strengthened to multi-decade highs in June, according to the CBI’s latest Industrial Trends Survey.

The survey of 464 manufacturers found that total order books climbed to the highest level since August 1988. This was underpinned by a broad-based improvement in 13 of the 17 sub-sectors, led by the food, drink & tobacco and chemicals sectors. Export orders also improved to a 22-year high, hitting similar peaks to those seen in 2011 and 2013.

Output growth eased to the levels seen at the start of the year, on the back of slowdowns in the chemicals and mechanical engineering sectors, but remained robust historically. Firms expect a firm rise in production over the coming quarter.

But pricing pressures remain strong, with manufacturers continuing to expect a sharp rise in average selling prices, in line with the level seen last month. Stock adequacy dipped marginally, remaining below average.

Rain Newton-Smith, CBI chief economist, said: “Britain’s manufacturers are continuing to see demand for “Made in Britain” goods rise with the temperature. Total and export order books are at highs not seen for decades, and output growth remains robust.

“Nevertheless, with cost pressures remaining elevated it’s no surprise to see that manufacturers continue to have high expectations for the prices they plan to charge.

“To build the right future for Britain’s economy, manufacturers and workers, the Government must put the economy first as it negotiates the country’s departure from the EU. This approach will deliver a deal that supports growth and raises living standards across the UK.”

Key findings:

• 27 per cent of manufacturers reported total order books to be above normal, and 12 per cent said they were below normal, giving a rounded balance of +16 per cent. This was the highest level seen in nearly three decades, since August 1988 (+17 per cent)
• 23 per cent of firms said their export order books were above normal, and 10 per cent said they were below normal, giving a balance of +13 per cent. This was the highest balance since June 1995 (+20 per cent)
• 30 per cent of businesses said the volume of output over the past three months was up, and 15 per cent said it was down, giving a balance of +15 per cent – a decline from the balance of +28 per cent seen in May
• Manufacturers expect output to grow at the same robust pace in the coming quarter, with 37 per cent predicting growth, and 9% a decline, giving a rounded balance of +27 per cent
• Average selling prices are still expected to rise in line with the level seen in May (+23 per cent), having eased from their peak in February (+32 per cent)
• 13 per cent of firms said their present stocks of finished goods are more than adequate, whilst 11 per cent said they were less adequate, giving a balance of +2 per cent, remaining below the average (+13 per cent).