Manufacturing output contracts in the quarter to March, says CBI

Manufacturing output volumes fell in the three months to March, at a slightly steeper pace than in the three months to February, according to the CBI’s latest monthly Industrial Trends Survey (ITS).

Looking ahead, manufacturers expect output volumes to be broadly unchanged in the quarter to June.

The volume of total order books in March was stable relative to last month, while export order books improved slightly. Both total and export order books are still well below their long-run averages.

Firms reported that stock adequacy picked up compared with February, with the balance returning above the long-run average.

Expectations for selling price inflation over the quarter ahead were largely unchanged relative to February, remaining above the long-run average.

Ben Jones, CBI Lead Economist, said, “Conditions in the UK’s manufacturing sector remain subdued. Although there are some pockets of strength, notably in the aerospace and defence sectors, many firms continue to report that their order books remain weak.

“Manufacturers responding to the survey reported that customers are generally nervous about proceeding with capital investments and are conserving funds ahead of upcoming increases to National Insurance and minimum wages, leading orders to be cancelled or at least delayed until later in the year.

“While output expectations are not as gloomy as at the turn of the year, the sector looks set to remain in a holding pattern in the short-term.

“Next week’s Spring Statement and continuing challenges to the public finances means a lot of the growth the country needs will have to come from the private sector. But businesses need a reason to grow and invest in uncertain times.

“A number of measures could help boost confidence – setting an ambitious R&D spending target so the government can position the UK as a world leader for innovation or ensuring that the Apprenticeships Levy is fully flexible to allow companies to invest in a range of employee training, will go some way to delivering the sustainable growth the country needs.”