CBI: UK manufacturing drops but firms expect improvement

Posted on: July 25th, 2019 by cbmEditor

CBI: UK manufacturing drops but firms expect improvement

The CBI quarterly Industrial Trends Survey for the quarter to July reports that manufacturing activity dropped but firms expect a slight recovery in the next few months.

New orders declined sharply in the quarter, from both domestic and export customers, with overall order books reported as below normal to the greatest extent since 2010.
Manufacturer inventories of both raw materials and finished goods continued to grow but at a slower pace than in the three months to April.

Here is the summary of the survey:
Key findings:
• 10% of firms said they were more optimistic about the general business situation than three months ago and 42% were less optimistic, giving a balance of -32%. Optimism about export prospects for the year ahead (-29%) worsened compared last quarter (-21%)
• 19% of firms said the volume of output over the past three months was up and 30% said it was down, giving a balance of -11%
• 24% of businesses reported a rise in new orders, and 38% reported a decrease, giving a rounded balance of -15% compared to +5% in the three months to April. Domestic orders dropped (-19% from +4% in April), and export orders fell (-28% from -3% in April), both at their respective quickest paces since the financial crisis
• Stocks of raw materials (+10% from +39% in April) and finished goods (+14% from +25% in April) grew at a noticeably slower pace in the three months to July, while stocks of work in progress were roughly flat (+2% from +21% in April), following record acceleration last quarter in all three categories
• 19% of manufacturers said employee numbers were up in the quarter to July, while 27% said they were down, giving a balance of -8% (from +9% in April)
• Growth in average unit costs (+15%) in the quarter to July grew at their slowest rate since July 2016
• Average domestic prices in the three months to July (-2% from +11% in April) were broadly flat
• Average export prices fell (-15% from +3% in the three months to April) at their fastest rate since January 2016
• The proportion of firms working below capacity (59%) was at its highest since April 2013
Key findings – looking ahead:
• Output volumes in the next three months are expected to recover slightly (+6%)
• New orders over the next three months are expected to pick up again (+10%), with domestic orders (+3%) being broadly flat and export orders (+9%) growing at an above-average pace
• The proportion of firms citing political/economic conditions abroad as a factor likely to limit export orders in the next three months (27%) declined noticeably from last quarter (54%)
• Stocks of raw materials (+2%) and work in progress (-2%) are expected to be broadly flat in the next three months, while stocks of finished goods (-13%) are expected to fall
• Employee numbers are expected to pick up again in the next three months (+16%)
• Average unit costs are expected to grow at a slower rate next quarter (+9%)
• Domestic price inflation (+12%) is expected to accelerate next quarter, while export prices (+21%) are expected to pick up sharply
• Planned spending on plant & machinery (-17% from -14% in January) and buildings (-26% from -18% in January) for the year ahead remains negative
• Meanwhile, manufacturers expect investment in training & retraining and product & process innovation in the year ahead to also deteriorate (-11% from +2% and -4% from +2%, respectively, in the previous quarter)
• The factor most cited as likely to limit investment plans in the year ahead was demand uncertainty (64%), with concerns at their most elevated since the financial crisis. Meanwhile, concerns over labour shortages remained heightened (25%).


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