Manufacturing output grew at the fastest rate since December 2018 – the first material growth reported in almost two years – according to the CBI’s latest monthly Industrial Trends Survey.
The survey of 272 manufacturers found that output increased in 12 of 17 sub-sectors, with growth driven by chemicals, electronic engineering, and metal products. Looking ahead, manufacturers anticipate output to accelerate further in the next three months.
Total order books also improved to their strongest since December 2017, and were reported to be “above normal” for the first time since February 2019. Export order books were broadly unchanged from April, but this nonetheless represented the strongest outturn since February 2020.
Manufacturers also reported the weakest stock adequacy since July 2017. Meanwhile, price growth is expected to pick up rapidly in the coming quarter, with expectations at their strongest since January 2018.
Anna Leach, CBI Deputy Chief Economist, said:
“Manufacturing activity rebounded this month, with strong improvements seen across total order books and output volumes. But firms are still feeling the chill as supply shortages fuel cost pressures, reflected in expectations for strong output price inflation in the coming quarter.
“Continued progress on the government’s reopening roadmap is hugely welcome, and gives cause for optimism. But manufacturers need clarity on future social distancing requirements and the future of workplace testing to smooth the route to recovery. This will also go some way to easing supply chain pressures, and thus partly ease the cost and pricing pressure.”/br>
Tom Crotty, Group Director at INEOS and Chair of the CBI Manufacturing Council, said:
“These latest figures are very positive, and it is great to see the sector bounce back from the bleak situation we saw last year. While this progress is welcome, firms continue to face several supply challenges and cost pressures as the UK moves along the roadmap.
“Manufacturing can be an engine for the UK’s economic growth and renewal over the long-term but, for this to be a reality, it will first be important for government to continue listening to firms to address short term barriers to recovery.”
Key findings
Output
- Output volumes grew at the fastest pace since December 2018 (+18% from +3% in April) in the three months to May.
- Output increased in 12 out of 17 sub-sectors, with growth being driven by the chemicals, electronic engineering, and metal products sub-sectors.
- Manufacturers expect output to accelerate further in the next three months (+33%).
Order books
- Total order books (+17%) improved on April (-8%, long-run average of -14%). The was strongest outturn since December 2017, and marked the first time order books have been considered to be “above normal” in over two years.
- Export order books (-17%) were broadly unchanged from April (-18%) but this nevertheless marked the strongest outturn since February 2020 and is around the long-run average.
Prices - Manufacturers expect output price growth to accelerate rapidly in the next three months (+38% from +27% in April), marking the strongest expectations since January 2018.
Stocks
- Present stocks of finished goods (-6 from +5 in April) fell to their weakest position since July 2017. This was also the first time since July 2017 that stocks were considered “less than adequate”.
