Strong order books boost output prospects for UK manufacturers

The CBI's latest monthly Industrial Trends Survey revealed that 32% of manufacturers are predicting a rise in output in the coming quarter, and 19% a fall. The resulting balance of +13% is back in line with expectations earlier in the year, and a marked improvement on November's expectation of a balance of +4%.

Total order books continued to strengthen, with 27% of companies reporting they were above normal in December, and 31% below. The resulting rounded balance of -3% is the strongest figure since June 2008 (a balance of +1%) and compares with a balance of -15% in November.

Overseas demand accounted for much of the improvement in total order books. Of the respondents, 25% reported export order books to be above normal, and 21% below, giving a balance of +4%. That is the strongest balance since August 1995 (+7%) and an improvement on November's balance of -7%.

Inflationary pressures remained intense for UK manufacturers in the December survey, with 27% expecting to raise prices in the next three months, and 11% expecting to reduce them. That gives a balance of +16%, compared with +17% in the November survey.

Ian McCafferty, CBI's chief economic adviser, observed: “These figures show that the recovery in the manufacturing sector is well underway. With total order books getting back to normal levels and overseas demand particularly strong, the outlook for UK manufacturing output growth is encouraging. The past sharp depreciation of Sterling should continue to underpin demand for UK exports into 2011.

“However, with oil and other commodity prices rising, cost pressures will remain a concern.”

CBI
www.cbi.org.uk