Friday, June 18, 2021

Manufacturing activity rebounds, but pricing pressures build

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.”

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.”

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