UK Manufacturing Output Continues to Expand

Manufacturing output continues to expand at a solid rate, according to the latest CBI monthly Industrial Trends Survey.

The survey of 481 firms found that manufacturers are expecting the rate of production to accelerate rapidly, with 11 of the 18 sub-sectors upgrading their expectations for output over the next three months.

Meanwhile, export order books weakened slightly, but remained comfortably above their long-run average. Chemical firms experienced the sharpest drop in overseas demand, contrasting with the motor vehicle and transport sector, which reported the greatest improvement. Total orders remained unchanged from the previous month, well above average levels.

Companies’ near-term expectations for prices eased, with a majority of respondents anticipating no change over the next three months.

Stock adequacy climbed to the highest level since June 2013, with half of the change in the balance accounted for by chemical manufacturers, who also scaled back their output the most out of the survey respondents.

Rain Newton-Smith, CBI Chief Economist, said:

“It’s good to see that manufacturers are enjoying a lingering summer with output running at a strong pace and manufacturers’ order books remaining solid, particularly amongst the food, drink and motor vehicles sectors.

“Our members tell us and our surveys show that the fall in sterling has boosted international competitiveness for many businesses, with export order books remaining well above average in September, despite weakening slightly.

“But there are plenty of challenges ahead for manufacturers as we adjust to a new relationship with the EU and the rest of the world. That’s why we want to see a focus on promoting investment and innovation in the Autumn Statement to ensure our makers are able to put their best foot forward and adjust to new opportunities.”

Key findings:

  • 18% of businesses reported total orders to be above normal and 22% said orders were below normal, giving a rounded balance of -5%.
  • 16% of businesses reported export orders to be above normal and 26% below, resulting in a balance of +10%.
  • 33% of businesses reported a rise in output volumes, and 22% a fall, giving a balance of +11%.
  • Output growth is expected to increase over the next three months, with 37% companies expected a rise and 15% expecting a fall, resulting in a balance of +22%.
  • Average prices are expected to reduce slightly over the next quarter, with 15% companies expecting to raise prices and 9% expecting to cut prices, giving a rounded balance of +5%, down from +8% last month.
  • 22% of businesses reported stocks as more than adequate to meet expected demand, and 7% less than adequate, resulting in a rounded balance of +16%, an increase on +4% from the previous month and the highest balance since June 2013 (+21%).

CBI

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell