This is what the CBI said
The UK’s manufacturers have reported strong growth in orders both at home and from abroad over the first quarter of 2017, although costs and prices have also continued to rise at an elevated pace, according to the latest quarterly CBI Industrial Trends Survey.
The survey of 397 manufacturers found that domestic orders had improved at the fastest pace since July 2014 in the three months to April. Meanwhile export orders recorded the strongest growth in six years, supported by strong rises in competitiveness, particularly in non-EU markets which improved at a record pace.
The weak pound continued to push up costs, with manufacturers reporting the strongest rises in unit costs in six years.
Output growth firmed to a three-year high and is expected to accelerate over the next quarter. Manufacturers’ anticipate that new orders will grow more moderately over the near-term, largely owing to a predicted slowdown in domestic demand outweighing export orders growth expectations for the latter are at their strongest in over two decades. Companies are also upbeat in their year-ahead expectations for exports, with optimism posting the biggest gain in over four decades, contrasting with their assessment about the overall business situation which was unchanged.
There was a softening in investment plans across the board, particularly those for buildings and plant & machinery, with the latter at its most negative for nearly six years. When queried about potential limits on capital spending over the next year, the proportion of firms citing inadequate net returns climbed to the highest in a decade. Headcount saw decent growth, but hiring intentions for the next three months are muted.
Rain Newton-Smith, CBI Chief Economist, said: “UK manufacturers are enjoying strong growth in demand from customers in the UK and overseas, and continue to ramp up production.”
“Exports have surged and firms are at their most optimistic about selling overseas in over four decades. Even so, the combination of the weak pound and recovering commodity prices means that cost pressures continue to build, and manufacturers report no sign of them abating over the near-term.”
- Domestic orders rose at their fastest pace (+20 per cent) since July 2014 (+23 per cent). Export orders growth accelerated to (+22 per cent) the highest since April 2011 (+24 per cent)
- 42 per cent of businesses reported an increase in total orders, and 17 per cent a decrease, giving a balance of +25 per cent, the highest since April 1995 (+27 per cent)
- 36 per cent of firms said the volume of output over the past three months was up and 14 per cent said it was down, giving a balance of +22 per cent, the highest since July 2014 (+23 per cent)
- 26 per cent of manufacturers said employee numbers were up, and 19 per cent said they were down, giving a balance of +7 per cent
- 23 per cent of firms said they were more optimistic about the general business situation than three months ago and 21 per cent were less optimistic, giving a rounded balance of +1 per cent. Optimism about export prospects for the year ahead (+30 per cent) climbed at the quickest rate since July 1973 (+33 per cent)
- Firms’ competitiveness in the UK grew firmly over the past three months (+12 per cent), while their competitiveness in non-EU markets rose at the fastest pace in the series’ history (+27 per cent)
- Average domestic prices (+27 per cent), average export prices (+24 per cent) and average unit costs (+45 per cent) all rose at the fastest pace since April 2011 (+53 per cent)
- Manufacturers intend to spend less on buildings (-15 per cent) and plant & machinery (-10 per cent) over the next 12 months than they did over the previous twelve months.
Key findings – looking ahead:
- Total new orders (+14 per cent), domestic orders (+7 per cent) and export orders (+24 per cent) are expected to continue to grow strongly over the next quarter
- Expectations for output growth (+16 per cent) remain solid
- Average domestic prices (+29 per cent), export prices (+20 per cent) and unit costs (+41 per cent) are all expected to rise quickly again over the next quarter.
This survey was conducted prior to the announcement of a general election.