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UK Manufacturing Output Rises for the First Time Since November 2022, CBI Survey Reports

by Anna

Manufacturers in the UK reported an increase in output volumes for the first time since November 2022 in the three months leading up to May, according to the Confederation of British Industry’s (CBI) latest Industrial Trends Survey (ITS). This positive trend is expected to continue, albeit at a modest pace, into the three months to August.

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Despite the uptick in production, order books remain under pressure, with both total and export order books weakening in May. Additionally, manufacturers indicated that stocks of finished goods were more than sufficient to meet the anticipated demand, while expectations for selling price inflation have softened compared to earlier in the year.

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The survey, which gathered responses from 245 manufacturers, revealed the following key findings:

Output Volumes: Increased in the three months to May, reversing a trend of flat or declining volumes since November 2022. The weighted balance was +14%, up from +3% in the three months to April. A modest rise in output is expected in the three months to August (+7%).
Sub-Sector Performance: Output growth was reported in 8 out of 17 sub-sectors, with the chemicals, food, drink & tobacco, and motor vehicles & transport equipment sub-sectors leading the overall growth.

Order Books: Total order books weakened, with a net balance reporting order books as “below normal” dropping to -33%, down from -23%. This remains below the long-run average of -13%.

Export Order Books: Also reported as below normal, with a deterioration relative to the previous month (-27%, from -23%), and below the long-run average of -18%.
Selling Price Inflation: Expectations for average selling price inflation softened to +15% in May, down from +27% in April, after a steady increase over the first four months of 2024.

Stock Adequacy: Improved, with the net balance of firms reporting stocks as “more than adequate” rising to +14% from -1% in the previous three months, aligning broadly with the long-run average.
Anna Leach, CBI Deputy Chief Economist, commented: “While it’s positive to see that manufacturers’ expectations for higher output volumes have finally been realised in the three months to May, this has been accompanied by a sharp deterioration in order books to close to their weakest since January 2021. Manufacturers expect to increase output through the summer months, but any recovery looks set to be fairly gradual, with order books soft and inventory levels relatively high.”

Leach emphasized the importance of pursuing reforms to boost growth and investment as the economy begins to recover. She highlighted the CBI’s latest report, “Tax and Green Investment,” which underscores the role of tax policies in incentivizing green investment. According to the report, such policies could drive up to £57 billion annually in additional GDP, sending a strong signal that the UK is an attractive place for business investment.

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