CBI industrial survey finds strong output growth

Oliver Haill Sharecast | 19 May, 2017 11:24 - Updated: 12:42 | | |

UK manufacturing output in the three months to May was much stronger than expected, according to a Confederation of British Industry survey published on Friday.

Driven by faster growth in export orders, the balance of manufacturing companies that reporting their order books were above normal levels was +9% greater than those reporting levels below normal, which was up from a balance of +4% in April and the highest in over two years. The market consensus was for no change from April's balance.

In addition, the balance of manufacturers expecting production to rise over the next three months increased to +28 in May, from +16 in April, albeit remaining below March’s recent peak.

However, fuelling concerns about the squeeze on British consumers from rising inflation, a balance of almost a quarter of the 432 manufacturers surveyed expected a sharp rise in average selling prices due to strong pricing pressures from inputs.

Another concern, which was raised in last month’s CBI survey is that manufacturers’ plans for investment in plant and machinery are at their lowest levels for six years.

The CBI's chief economist Rain Newton-Smith said: "Robust demand at both home and abroad is reflected in strong order books, and output is picking up the pace.

“On the other side of the coin though, we have mounting cost pressures and expectations for factory-gate price rises are running high."

Economists have pointed out that the CBI industrial trends survey and other survey evidence for the manufacturing sector has tended to be markedly more upbeat than the hard data from the Office for National Statistics.

Samuel Tombs at Pantheon Macroeconomics said the survey showed manufacturers are benefiting from the revival in world trade and sterling’s depreciation.

"The 3% year-over-year growth rate of manufacturing output signalled by the CBI’s survey, however, is not sufficient to offset fully the slowdown in the consumer sectors of the economy brought on by sterling’s depreciation," he said.

"What’s more, the risk that the UK leaves the EU without a deep trade deal in place is casting a cloud over the outlook for manufacturing," he added, pointing to the six year low in investment plans and suggesting capacity constraints might bite soon, preventing manufacturers from making the most of sterling’s depreciation.

More news

17:59 Europe close: Stocks dip amid Spanish impasse, overbought conditions

A stronger euro despite the continuing political stand-off in Spain weighed on stocks across the continent.

17:28 London close: UK stocks fall with sterling as investors mull retail sales

London stocks closed in the red on Thursday after disappointing UK retail sales data and with ongoing concerns about stalled Brexit negotiations.

17:18 Results round-up

London Stock Exchange announced the departure of chief executive Xavier Rolet on Thursday, confirming he would leave the group by the end of December next year after nine years with the company.

17:08 Investec says Rio Tinto is preferred pick among diversified miners

Analysts at Investec reiterated their "preference" for shares of Rio Tinto among the diversified majors, despite the miner's "mixed" third quarter results.

17:01 FTSE 100 movers: Unilever and WPP lead retreat as sector growth disappoints

The FTSE 100 retreated 0.29% in afternoon trading on Thursday as equity markets were seen affected by disappointing retail data.

16:49 Friday preview: UK public finances; results from IHG, Acacia, Renishaw

UK public finances will come under the microscope on Friday 20 October, while later on US Fed Chair Janet Yellen speaks and there are results from InterContinental Hotels, Acacia Mining and Renishaw.

16:14 Apple shares fall after Watch connection issues in China

Shares of US tech giant Apple were suffering their biggest decline in the last month after Wall Street opened on Thursday amidst reports that the Apple Watch was suffering from service issues in China.

16:09 US open: Wall Street dips on anniversary of 1987 Black Monday crash

Wall Street's main averages came under selling pressure as traders booked some profits on the 30th anniversary of the 1987 Black Monday US stock market crash that saw the S&P 500 plummet 20% in a single session.

15:59 SigmaRoc gobbles up Topcrete and Allen Concrete

Buy-and-build construction materials group SigmaRoc announced the acquisition of Topcrete and its wholly owned subsidiary Allen Concrete on Thursday, for an initial cash consideration of £9m and a deferred conditional cash consideration of £3.5m, subject to certain adjustments in respect of completion accounts.

15:51 Keywords Studios acquires development service provider d3t

Video games industry technical services provider Keywords Studios announced on Thursday that it has acquired d3t for a total consideration of £3m from the founders Jamie Campbell and Stephen Powell, and “others”.