Manufacturing output falls while selling price expectations accelerate - CBI Industrial Trends Survey

Manufacturers reported that output volumes fell in the three months to February, and at a faster pace than in the three months to January, according to the CBI’s latest Industrial Trends Survey (ITS). However, manufacturers expect output to rise marginally in the quarter to May.

Both total and export order books were reported as below normal in February, though they improved relative to last month. Expectations for future selling price inflation ticked up in February, to their strongest since July 2023.

The survey, based on the responses of 344 manufacturers, found:

• Output volumes fell in the three months to February at a faster pace than in the quarter to January (balance of -19%, from -10% in the three months to January). Output is expected to rise slightly in the three months to May (+4%).
  • Output fell in 15 out of 17 sub-sectors in the three months to February, including in the chemicals, motor vehicles & transport equipment, metal products and building materials sub-sectors.
• Total order books were reported as below “normal” in February, but improved relative to last month (balance of -20% from -30%). The level of order books remained below the long-run average (-13%).
• Export order books were seen as below normal, but also improved relative to last month (balance of -14% from -27%). This was above the long-run average (-18%).
• Expectations for average selling price inflation accelerated in February (balance of +17% from +9% in January), climbing above the long-run average (+7%). Selling price expectations were the strongest since July 2023, but remained well below the multi-decade high seen in 2022 (+80% in March 2022).
• Stocks of finished goods were seen as more than “adequate” in February (balance of +11% from +18% in January).

Anna Leach, CBI Deputy Chief Economist, said:

“UK manufacturing conditions remain challenging, with lower output volumes widely reported across the sector this month. But there were also some hopeful signs. Order books improved - in the case of export orders to above their long-run average - and manufacturers continue to expect output to improve in the months ahead.

As we head towards the Budget, it is critical that the Chancellor uses this opportunity to put the country on a path to sustainable growth through further steps to incentivise innovation and investment in high-growth sectors, including in manufacturing, for example, through bringing capital expenditure within the scope of the R&D tax credits scheme.”