Manufacturing output was flat in the three months to September, a slight improvement on August. That’s according to the latest monthly CBI Industrial Trends Survey.
The survey of 269 manufacturing firms revealed that both total order books and export order books were reported as below normal, and to a much greater extent than in August.
Output volumes expanded in 9 of 17 sub-sectors in the quarter to September, with the food, drink & tobacco and mechanical engineering sub-sectors driving the positive contributions to growth. Meanwhile, the main drags on growth were the metal manufacture, metal products and textiles & clothing sub-sectors. Respondents anticipate that output volumes will fall at a brisk pace in the next three months.
Manufacturers expect output price inflation in the next three months to accelerate above the long-run average. This follows expectations of no change in August. Present stocks of finished goods were reported as above adequate to the greatest degree since the financial crisis (May 2009).
Anna Leach, CBI Deputy Chief Economist, said:
“Following a stabilisation in last month’s data, UK manufacturers have become noticeably gloomier in September. This likely reflects a combination of heightened Brexit uncertainty and the ongoing global slowdown in manufacturing.
“With little more than a month to go until 31 October, the message from business is clear. Both sides need to get a deal by compromising to protect jobs and livelihoods on both sides of the Channel.”
Tom Crotty, Group Director of INEOS and Chair of CBI Manufacturing Council, said:
“Given there is still no Brexit resolution with just weeks to go until the 31 October deadline, it is no surprise that manufacturers have reported a gloomy outlook.
“Each day of Brexit uncertainty sees firms forced to withhold key investment and recruitment decisions that make a huge difference to communities across the country.
“It is therefore crucial that no more time is wasted in ending the Brexit deadlock, and that a damaging no-deal cliff-edge is avoided at all costs.”
Meanwhile, official data showed that the economy contracted slightly in the second quarter of the year, as the drive to build stocks ahead of the spring Brexit deadline unwound and car companies adjusted their annual factory shutdowns. Early indications of growth for the third quarter are subdued, with underlying momentum weak. At the same time, global growth is expected to slow as trade tensions continue to erode world trade flows. For more information, see our July Economic Forecast.
- 13% of manufacturers reported total order books to be above normal, and 41% said they were below normal, giving a balance of -28% (from -13% in August) – compared to a long-run average of -13%
- 6% of firms said their export order books were above normal, and 37% said they were below normal, giving a rounded balance of -32% (from -15% in August) – compared to a long-run average of -17%
- 25% of businesses said the volume of output over the past three months was up, and 24% said it was down, giving a balance of +1% (from -3% in August, and roughly in line with the long-run average of +4%)
- Manufacturers expect output to contract at a fast pace in the coming quarter, with 19% predicting growth, and 38% a decline, giving a balance of -19% - the weakest expectations since April 2009
- Expectations for growth in average selling prices for the coming three months (+12%) accelerated to pace above the long-run average of +3%
- 30% of firms said their present stocks of finished goods were more than adequate, whilst 2% said they were less than adequate, giving a balance of +28% – the highest balance since May 2009.