The survey of 328 respondents also found that output continued to rise firmly, albeit at a slightly slower pace than in the previous quarter. However, optimism about the business situation was unchanged over the past three months, following a solid rise last quarter. Indeed, prospects for the next three months are weaker, with export orders growth expected to slow markedly and domestic orders to decline slightly. Nonetheless, firms expect to maintain the same decent pace of growth in output.
Investment intentions were lacklustre, with plans for plant & machinery spending deteriorating to their most negative since just after the EU referendum. Firms expect to keep spending on buildings broadly unchanged, and while investment intentions on “intangible” areas (product & process innovation and training) were more positive, they also softened somewhat. In contrast, numbers employed grew at a strong pace over the past quarter, and are expected to continue growing firmly over the next quarter.
Capacity pressures remained high, with the number of firms citing plant capacity as a factor likely to limit output rising to its highest on record (since October 1988). Expanding capacity was also increasingly cited as a motivation for new capital expenditure, also to the greatest extent in the survey’s history. Concern over skills and labour shortages also remained elevated, albeit receding from the highs seen in recent surveys.
Elsewhere, growth in average unit costs picked up, remaining well above the long-run average, and manufacturers continued to raise domestic and export prices firmly. While cost pressures are set to ease a little, firms expect another strong rise in output prices over the coming three months, with export price inflation in particular set to pick up.
CBI www.cbi.org.uk
