UK manufactures report solid demand

Paul Boughton
UK manufacturers continue to report healthy order books and expect further output growth in the coming quarter, though at a slightly slower pace than over the past few months, according to the Confederation of British Industry (CBI).
Manufacturing demand remained strong in June. Of the 457 manufacturers responding to the CBI’s latest monthly Industrial Trends Survey, 27 per cent of manufacturers describe total orders as above normal, while 26 per cent said they were below normal. The resulting balance of +1 per cent is well above the long-term average (-18 per cent), and is a slight improvement on the previous month’s balance of -2 per cent.
Export orders books also picked up slightly in June, with 27 per cent of firms saying they were above normal, and 27 per cent below normal. The resulting balance of 0 per cent compares with -3 per cent in May, and is significantly above the long-term average (-21 per cent). It is a continuation of the broader trend of improvement that has been evident over the past two years.
Manufacturing firms still expect solid growth in output in the coming quarter. While 28 per cent predict output will rise in the coming three months, 14 per cent predict it will fall. The resulting rounded balance of +13 per cent is down slightly on very strong expectations seen over the past five months, but still exceeds the long-term average (+5 per cent).
However, price pressures remain a concern, with 31 per cent of manufacturers predicting they will raise output prices over the coming quarter, and 5 per cent expecting to lower prices. The resulting rounded balance of +27 per cent is up on last month’s +24 per cent, and remains well above the long-term average of +1 per cent.
Ian McCafferty, CBI Chief Economic Adviser, said: “UK manufacturers currently have healthy order books. Factory output is still set to rise solidly over the coming quarter, but expectations for growth have moderated compared with recent months, when output prospects were particularly strong. This reflects the slightly softer patch for manufacturing evident in other economies, much of which appears due to the temporary supply chain disruptions following the tsunami in Japan.
“Inflationary pressures remain acute. High commodity prices and import costs mean firms still expect to raise factory gate prices markedly over the next three months.”
A balance of +3 per cent of firms report adequate stock levels, down from last month’s +9 per cent. Stock levels have remained below the long-run average (+14 per cent) since January 2010.
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