Marcus Evans Group | Worldwide Headquarters | American Offices | Latin America | European Offices | African / Asian Offices

UK manufacturing recovery stays on track

CBI figures found manufacturing firms in upbeat mood, with a rise in demand and inflationary pressures easing

Britain’s manufacturers have so far been left untouched by the recent turmoil in the world’s financial markets, and expect healthy order books to be translated into higher factory output over the coming months.

The latest monthly snapshot of industry from the CBI found companies in upbeat mood, with increased demand for their products and the steep upward price pressures from earlier in 2011 on the wane.

Of 510 firms responding to the survey by the employers’ organisation, 29% said order books were above normal for the time of year and the same number said they were below normal. The CBI said that when rounded there was a balance of +1 percentage points, well above the long-term average of -18 percentage points.

More firms (31%) said they expected to increase output over the coming months than expected production cutbacks (17%), but the CBI said the rounded balance of +13 points was weaker than the results seen earlier in the year.

Richard Woolhouse, the CBI 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.” The survey showed that 19% of firms were planning to raise prices in the next three months and 10% were expecting to cut them. The balance of +9 points showed a marked fall from the recent peak of +36 points in April.

Woolhouse warned that “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.”

Samuel Tombs, UK analyst at Capital Economics, said: “August’s CBI Industrial Trends survey provides a bit of reassurance that the recovery in manufacturing sector has not completely petered out.

“That said, the message of the survey does go against the grain of recent news on manufacturing, and it has occasionally been too upbeat relative to the official data in the past.” © Guardian News & Media Limited 2011 | Use of this content is subject to our Terms & Conditions | More Feeds