Manufacturing output declines for the fifth month running – CBI Industrial Trends Survey

Manufacturers’ order books remained weak in June, according to the CBI’s latest Industrial Trends Survey.

Output of UK manufacturing firms fell marginally in the three months to June, for the fifth successive month, though at a slower pace than in April and May and in line with expectations. Output volumes are expected to rise slightly in the three months to September.

Total order books were reported to be below normal, to a broadly similar extent to May. Export order books were also seen as below normal, but deteriorated slightly, leaving them in their weakest position since February 2021.

The survey, based on the responses of 233 manufacturing firms found:

• Output volumes fell marginally in the three months to June (weighted balance of -6%, from -10% in the three months to May). Output is expected to rise slightly in the three months to September (+4%), with expectations mildly positive again after briefly turning negative last month.
• Output fell in 12 out of 17 sub-sectors in the three months to June. The largest contributions to the fall came from the mechanical engineering and food, drink & tobacco sub-sectors.
• Total order books were reported as below “normal” in June, to a broadly similar extent to May (-15% from -17%). This leaves them standing marginally below the long-run average (-13%).
• Export order books were also seen as below normal and deteriorated marginally from last month (-29% from -26%). This was also weaker than the long-run average (-18%) and leaves export order books in their weakest position since February 2021.
• Expectations for average selling price inflation in the three months ahead fell slightly in June (+19%, from +21%), the sixth consecutive monthly fall, to stand at their softest since February 2021. Although selling price inflation expectations were comfortably below the multi-decade high seen in 2022 (+80% in March 2022), they remained well above the long-run average (+7%).
• Stocks of finished goods were seen as comfortably above “adequate” in June (+15% from +10% in May) and remained broadly in line with the long-run average (+12%).

Anna Leach, CBI Deputy Chief Economist, said:

"May marked another weak month for UK manufacturing, with activity declining for the fifth time in a row. Manufacturing activity is likely to have shrunk a little during the second quarter, as weak demand has overwhelmed some stabilisation in supply chains and costs. Total order books have improved a touch in recent months, but they remain fairly soft. And although output expectations have turned positive again, growth is expected to be quite weak in the three months to September.

"Against a backdrop of subdued demand, manufacturers are maintaining a cautious approach to investment. The introduction of full expensing at the Spring Budget was welcomed by the manufacturing sector, but this should be made permanent to give the confidence businesses need to press ahead with their plans, so we can tackle the long-term weakness in UK business investment."