Sentiment within the manufacturing sector improved in April and output expectations were the strongest for six months, according to the CBI’s latest quarterly Industrial Trends Survey.

Output volumes were broadly stable in the three months of the year, following strong declines in output over the first quarter of 2024. Manufacturers expect output to rise over the next three months, with expectations the strongest since October 2023. Average cost growth remained elevated compared to historical norms, with costs also expected to increase at a strong pace in the quarter to July. Domestic and export price inflation are expected to pick up slightly in the next three months.

With demand uncertainty and concerns over the cost of financing diminishing, investment intentions for the year ahead improved relative to January. Manufacturers anticipate investment in buildings and plant and machinery to be stable over the year ahead, which marks a shift from the picture in January, when investment intentions sank to their weakest for three years. Moreover, spending on product and process innovation is now expected to increase over the year ahead.

Anna Leach, CBI deputy chief economist, said: “Conditions facing manufacturers have taken a turn for the better, with sentiment improving and expectations for future output growth their strongest in six months. A softer labour market has eased concerns that skills and labour could constrain output and orders. Concerns about access to materials and components are also at their lowest since January 2020. These brighter conditions are supporting a more stable picture for investment over the year ahead.”

She concluded: “With the recovery still to fully pick up steam, we need to see everyone laser-focused on delivering the big reforms that will help manufacturers grow and invest. Full capital expensing, with the potential to extend this to leased and rented assets, can be a game-changer that unlocks the incredible power of our manufacturing sector and drives economic growth.”