Steady growth in UK manufacturing output

The UK manufacturing sector is showing resilience in the face of challenging economic conditions, with orders and output growth steady, the CBI reported last week. Both measures of activity indicated modest growth in the three months to July, while manufacturers’ optimism about the general business situation was broadly stable relative to the previous three months (-6%).

Of the 398 manufacturers responding to the latest CBI quarterly Industrial Trends survey, 29% reported that total orders had increased in the three months to July, while 26% said that they had fallen. The resulting balance of +3% is above the long-run average (-3%), but a little below the +8% balance in the three months to April. Export orders weakened slightly (-6%), but the balance was broadly in line with its long-run average (-8%). Total orders are expected to grow at a similar pace over the next three months (+4%), with export orders expected to be flat (0%).

Output growth picked up slightly in the quarter to July, with 29% of manufacturers reporting that output volumes were up compared with the previous three months, and 21% saying they were down. The resulting balance of +8% is the strongest seen this year, and above the long-run average (0%).

A further modest pick-up in growth (+11%) is expected over the next three months. Reflecting continued uncertainty in the euro-zone, the number of firms citing uncertainty about demand as a factor likely to limit their capital expenditure over the coming year was above the long-run average (+55% compared with an average of +49%). The three months to July saw an increase in numbers employed (+13%) for the eighth consecutive quarter, and firms expect the head-count to be stable in the coming three months (-2%).