Sentiment across the manufacturing sector fell in October and at the fastest pace in two years, according to the
CBI’s latest quarterly Industrial Trends Survey. Manufacturing output volumes fell over the quarter to October, though less rapidly than in the quarter to September. Output is expected to be broadly unchanged over the next three months. Total new orders fell in the quarter to October, reflecting the sharpest decline in domestic orders since July 2020, as well as lower export orders. A further decline in new orders is expected, with over two-thirds of respondents citing the strength of order books as a factor likely to limit output over the next three months.
Pressures on costs and prices have diminished compared to July this year, while growth in average costs eased to its slowest pace in four years in the quarter to October, with a similar increase expected in the coming quarter. Domestic and export selling price inflation has also eased, with the latter falling for the first time in four years. Overall selling prices are expected to be stable in the three months to January. The outlook for hiring and investment remains subdued. Manufacturing headcount actually rose for the first time in over a year over the past quarter, but numbers employed are expected to remain unchanged over the coming quarter. Meanwhile, investment intentions for the year ahead have weakened across the board.
Ben Jones, CBI lead economist, said: “Sentiment in the manufacturing sector appears to have soured in recent months. Demand has softened both at home and abroad. Although cost pressures have eased, costs are still rising faster than prices, implying a further squeeze on margins. The recent downturn is expected to bottom out in the coming quarter, which is encouraging. But amid a more uncertain outlook manufacturers have scaled back their plans to invest in buildings, capital equipment, innovation and training.
“Manufacturers will be looking to the Chancellor to deliver a confidence-boosting Budget that supports business and greases the wheels of investment. While possible tax rises remain a concern, firms believe that clarity over future tax plans, measures to enhance productivity, and the country’s ‘net zero’ trajectory can all help cement the path to long-term growth.”