UK manufacturing output growth hits highest since 1988

UK manufacturing output growth has leapt to a 29-year high as the weak pound drives export demand, though Brexit uncertainty is holding back investment.

The CBI's industrial trends survey found a balance of +17% more manufacturers reporting total orders above normal in the three months to November, which was the highest average since August 1988.

The balance was derived from 28% of manufacturers reporting total order books to be above normal, and 11% said they were below normal.

Food & drink and chemicals sectors reported the strongest balances in total order books.

Export order books are at a 20-year high, with export orders balance surging to +20% from +5 in October, equal to the record high from June 1995. Export order books strengthened notably in chemicals, electronics and transport goods.

However, while the balance of manufacturers expect output to rise over the next three months to February, this balance fell from +19 to +13, its lowest level since August 2016.

“UK manufacturers are once more performing strongly as global growth and the lower level of sterling continue to support demand," said Anna Leach, the CBI's head of economic intelligence.

“Nonetheless, uncertainty continues to hold back investment and cost pressures remain strong. Manufacturers will be hoping the Budget brings some relief from the business rates burden in particular.”

Economists at Pantheon Macroeconomics said the fall in output expectations "suggests that many manufacturers are running at full capacity and can’t easily increase production in the near-term to meet higher demand".

He noted that last month’s quarterly CBI survey found that manufacturers were the least optimistic about the overall outlook since just after the referendum.

"In addition, manufacturers that planned to increase investment were outnumbered by those that planned to reduce capex. Accordingly, the boost to industrial production and exports from sterling’s depreciation likely will remain too small to compensate for the damage it has inflicted on consumers."