Domestic orders power manufacturing recovery
The recovery in British manufacturing continued apace in the last quarter, with faster growth in domestic orders and output, according to the latest CBI quarterly Industrial Trends Survey.
The survey of 481 firms reported robust growth in orders in the three months to July. Total order book growth edged up on last quarter’s 19-year high, whilst domestic orders rose at their fastest pace since 1988, although export orders were flat. Numbers employed in the manufacturing sector also continued to rise strongly.
Firms are upbeat about the next quarter, with expectations for total new orders growth at their strongest since 1977, and export orders set to rebound.
Looking to the year ahead, manufacturers’ plans for investment in product and process innovation are at their strongest since 1989, with robust plans for spending on plant & machinery, and buildings. The number of firms investing to expand capacity reached a record high (since 1979). However, the proportion of firms concerned that political and economic conditions abroad may limit export orders rose sharply to a five-quarter high.
Katja Hall, CBI Deputy Director-General, said: “The recovery in the manufacturing sector is keeping a good pace. Industry is performing well as orders and hiring are on the up, and investment intentions for the year ahead are looking healthy across the board.
“It is not all plain sailing however, and there are still risks to the recovery. These include increasing international political instability, and the recent rise in sterling, which could be weighing on exports. We need to continue to help manufacturers to export their products to high-growth markets across the globe, to give a healthy and sustainable boost to the UK’s recovery.”
Key findings – three months to July 2014:
• 41 per cent of businesses reported an increase in total orders, and 17 per cent a decrease, giving a balance of +24 per cent, the highest since April 1995 (+27 per cent)
• The balance for new domestic orders (+23 per cent) was the highest since July 1988 (+25 per cent), but export orders (0 per cent) were flat, following growth in the three months to April (+16 per cent)
• 33 per cent of manufacturers said employment numbers were up, and 12 per cent said they were down, giving a balance of +21 per cent, the highest since January 1974 (+21 per cent)
• 27 per cent of firms said they were more optimistic about the general business situation than three months ago, and nine per cent less, giving a rounded balance of +19 per cent
• 36 per cent of businesses reported a rise in output volumes, and 13 per cent a decrease, giving a balance of +23 per cent
• The number of firms saying expanding capacity would be the main reason for investment over the next 12 months rose to 51 per cent, a survey high
Looking ahead to the next quarter, 42 per cent of manufacturers expect total new orders to increase, and eight per cent expect them to fall, giving a rounded balance of +33 per cent – the highest since April 1977 (+38 per cent).
A rounded balance of +26 per cent expect new domestic orders to rise, 39 per cent anticipate a rise in output volume and 24 per cent expect employment to increase.