UK manufacturing orders on the up, finds CBI industrial trends

UK manufacturing order books swelled this month and are expected to remain strong into the autumn thanks to the continued weakness of the pound.

In the CBI’s latest monthly Industrial Trends Survey, the headline total orders balance improved to +13 from from +10, topping the consensus expectation that it would soften to +9.

Export orders rose to +11 from +2, with a month-on-month improving of export orders in 10 of the 17 manufacturing sub-sectors, led by mechanical engineering and aerospace.

The survey, which was carried out among 432 manufacturing firms in the UK, found a balance of 30% of businesses reporting an increase in the volume of output over the past three months, well above the long-run average of +3%.

Firms expect output to grow at the same pace in the coming quarter, with 38% predicting growth, and 7% a decline, also giving a balance that was rounded down to +30% versus a long-run average of +8%.

While exporters are feeling the benefit from the lower pound, Anna Leach, the CBI's head of economic intelligence, said expectations for selling prices have rebounded after a brief pause last month, indicating that the squeeze on consumers is set to persist.

She expects the consumer price index to top out at around 3% towards the end of this year and remain close to that level during 2018, as the effect of the weak pound continues to feed through.

The rise in orders and expectations appeared to be driven by a pickup in exports orders, said Andrew Wishart of Capital Economics,

"Overall, the survey remains consistent with a sharp acceleration in annual manufacturing growth from -0.6% in Q2 to over 1% in Q3.

However, Wishart said the CBI survey has proved a poor guide to the official figures recently, though he and his colleagues remain optimistic that some improvement in the manufacturing sectors’ performance is in prospect for the second half of this year.