Image by Markus Distelrath from Pixabay

According to the latest monthly CBI Industrial Trends Survey, UK manufacturing output slowed in the three months to June, while total order books and export order books also softened. Output growth is expected to slow further in the quarter ahead, while expectations for domestic price growth fell back to a nine-month low.

The survey, based on the response of 212 manufacturers, revealed that manufacturing output growth slowed slightly in the three months to June (balance of +25%, from +30% in May). Growth is expected to ease further in the three months ahead, but expectations remain well above their long-run average (+20%; average is +9%).

Meanwhile, uutput increased in 12 out of 17 sectors in the three months to June. The motor vehicles and aerospace sub-sectors provided the largest contribution to the headline balance this month, while the food, drink & tobacco sub-sector made a negative contribution for the first time in just over a year.

Total order books were seen as above normal to a lesser extent than last month (+18% from +26% in May), while the volume of export order books fell back to a normal level (+1% from +19% in May).

Stocks of finished goods were seen as adequate in June, after being reported as inadequate in all but one month during the previous 13 months (+2% from -15% in May).

Expected domestic price growth for the three months ahead eased markedly in June (+58%, from +75% in May and a survey record of +80% in March). This was the weakest expectations for selling price inflation since September 2021.

Anna Leach, CBI deputy chief economist, said: “While manufacturing output is still being supported by a backlog of orders, growth appears to be softening. Stocks of finished goods are now seen as broadly adequate and we may be seeing the first signs that weaker activity is beginning to slow the pace of price increases in the sector.

“Manufacturers continue to report a range of challenges, including significant cost pressures, shipping delays, shortages of key inputs, and, not least, recruitment difficulties. Skills shortages remain widespread and are a key constraint on growth. All of these trends are weighing on confidence.

“Companies are pursuing a range of strategies to cope with these operational difficulties, but they can only do so much and government must act now to prevent a deeper and more prolonged slowdown. Creating a permanent investment incentive and tackling skills shortages by introducing immediate flexibility to the apprenticeship levy would be strong first steps for boosting confidence.”

Chirag Shah, CEO and founder of Nucleus Commercial Finance, commented: “The fact UK manufacturing output slowed in the three months to June and is expected to slow further in the next quarter is less than promising. Inflation, cost-of-living and the potential for further rate rises this year continue to ramp up pressure for manufacturers – as well as ongoing shipping delays, shortages of key inputs, and finding enough workers with the right skill sets.

"There are a number of challenges businesses will need to overcome, whether that is further financial support packages from the Government or clear routes which will help tackle skills shortages.”