Manufacturers more optimistic

A new survey has dispelled some of the gloom surrounding the UK’s manufacturing output.

Fears have been growing that the recovery in the manufacturing sector has been petering out.

But the CBI’s latest monthly industrial trends survey has suggested that the picture is not quite as gloomy as thought.

According to the CBI, UK manufacturers are reporting healthy order books, while expectations for output growth are above their long-run average.

The hope is that domestic and global demand may not be quite as weak as some analysis has indicated.

Of the 510 manufacturers polled in August, 29 per cent described total orders as above normal, and 29 per cent said they were below. The balance of +1 per cent showed, the CBI said, that order books remain well above the long-term average of -18 per cent.

The figure marks a distinct improvement on the previous month’s balance of -10 per cent.

Expectations for growth in factory output over the coming quarter picked up a little too. Almost a third of respondents (31 per cent) predicted that production will rise in the next three months, while 17 per cent anticipated a decline.

The CBI added a warning, however. Although the resulting balance of +13 per cent remains above the long-term average (+6 per cent), it nevertheless represents a continuation of the broader trend of moderating expectations since April.

There has been an easing of inflationary pressures. Some 19 per cent of manufacturers forecasted that they will raise output prices over the coming quarter, as opposed to the 10 per cent that expected to lower prices. The resulting balance of +9 per cent is considerably lower than the much stronger expectations seen in the months prior to July.

Richard Woolhouse, the CBI’s head of fiscal policy, said: “Manufacturing order books are holding up, and expectations for output growth are above their historical average, although they are less strong than earlier this year.

“Inflationary pressures have eased since the start of the year, with fewer firms predicting they will have to raise prices at the factory gate over the coming quarter.

“But the risks to manufacturing activity and business confidence have if anything increased, due to market volatility and the recalibration of growth expectations worldwide. Concerns around growth in the US and the Euro area present further challenges to the manufacturing recovery.”