Manufacturing output
growth in the quarter to March was at its weakest since May 2018, according to
the latest monthly CBI Industrial Trends Survey.
The survey of 358
manufacturers found that total order books softened slightly on the previous
month, while remaining above their long-run average. Export order books
strengthened from February and remain historically elevated.
Output volumes
growth weakened marginally in the three months to March, falling in line with
the long-run average. However, this month’s pace of growth was weak by
comparison with the strong output growth rates seen over 2017-18.
Output volumes
expanded in 11 out of 17 sub-sectors, with growth driven predominantly by the
food, drink, & tobacco, chemicals, and metal manufacture sub-sectors.
Meanwhile, the mechanical engineering, paper, printing & media, and motor
vehicles & transport equipment sub-sectors were the main drags on growth.
Looking ahead, firms anticipate output volumes to grow at a broadly similar
pace in the next three months.
Manufacturers
reported that stock adequacy remained broadly in line with the long-run
average. Meanwhile, expectations for price inflation in the next three months
eased noticeably to their slowest pace since September 2016.
An extra question
included in this survey asked manufacturers how Brexit uncertainty was
affecting their activity. A quarter of respondents reported stockbuilding, with
others mentioning depressed investment and demand due to uncertainty, and the
difficulty in obtaining export orders.
Anna Leach, CBI Head
of Economic Intelligence, said: “The manufacturing sector has slowed again this
month and is now barely growing. Brexit uncertainty is one of the biggest
threats to growth in the UK manufacturing sector – both current and future – as
firms prioritise stockpiling goods over investing in the future of their
business.
“It is essential
that politicians eliminate the threat of a “no deal” Brexit in order to
alleviate manufacturers’ fears of border delays, ruptured supply chains and
tariffs on exports to the EU.”
Tom Crotty, Group
Director of INEOS and Chair of CBI Manufacturing Council, said: “Manufacturers
are in despair at the unacceptable failure of politicians to end the Brexit
impasse. Every day that goes by without a resolution results in more businesses
putting off investment and stockpiling goods in order to soften the blow from a
potentially disastrous “no deal” Brexit scenario.
“It is crucial that
Brexit uncertainty is lifted as a matter of urgency. Only then can
manufacturers begin to move forward and shift our attention on to resolving the
long-term challenges facing the sector – such as solving our skills challenge
and raising productivity.”
UK manufacturers
continue to be supported by the lower level of sterling. However, the recent
slowing in global economic momentum means that there will be less support for
the UK manufacturing sector from external demand. All in all, though, the
continued threat of a no-deal Brexit poses the biggest risk to the outlook for
UK manufacturers. For more detail, see our December economic
forecast.
Key findings:
- 27% of manufacturers reported
total order books to be above normal, and 26% said they were below normal,
giving a balance of +1% (from +6% in February). This was still comfortably
above the long-run average (-13%)
- 28% of firms said their
export order books were above normal, and 20% said they were below normal,
giving a balance of +8% – above the long-run average of -17% and stronger
than February (+1%)
- 30% of businesses said the
volume of output over the past three months was up, and 26% said it was
down, giving a balance of +4%. This rate of growth was down a little on
February (+7%) and in line with the long-run average (+4%), but was,
nevertheless, the weakest rate of growth reported since May 2018 (+3%)
- Manufacturers expect output
to grow at a somewhat faster pace in the coming quarter, with 29%
predicting growth, and 22% a decline, giving a rounded balance of +7%
- Expectations for growth in
average selling prices for the coming three months (+7%) were at their
slowest since September 2016, but still slightly quicker than the long-run
average (+3%)
- 21% of firms said their
present stocks of finished goods were more than adequate, whilst 10% said
they were less than adequate, giving a balance of 11% – roughly in line
with the long-run average (+13%).
