Sunday, June 16, 2024

Manufacturing output falls at fastest pace since September 2020

Manufacturers reported the sharpest fall in output volumes since September 2020, according to the CBI’s latest Industrial Trends Survey.

Motor vehicles & transport equipment, mechanical engineering, paper, printing & media, and chemicals sub-sectors drove the decline in output over the three months to August. Looking ahead, output volumes are expected to stabilise in the next three months.

Firms anticipate that price pressures will continue to ease going forward, with expectations for selling price inflation over the next three months at their softest since February 2021.  

The survey, based on the responses of 277 manufacturing firms, found:

  • Output volumes fell in the three months to August (weighted balance of -19%, from +3% in the three months to July), marking the sharpest decline since September 2020. Output is expected to be broadly stable in the three months to November (-3%).
    • Output fell in 15 out of 17 sub-sectors in the three months to August, driven by the motor vehicles & transport equipment, mechanical engineering, paper, printing & media, and chemicals sub-sectors. 
  • Total order books were reported as below “normal” in August and to a greater extent than in July (-15% from -9%). However, this outturn was broadly in line with the long-run average (-13%). Export order books were seen as below “normal,” having deteriorated from last month (-18% from -11%). This was also on a par with the long-run average (-18%).
  • Expectations for average selling price inflation were at their softest since February 2021 (+8%, from +18% in July; long-run average of +7%). Expectations for selling price inflation have eased for eight consecutive months, having fallen sharply from the multi-decade high seen in 2022 (+80% in March 2022).
  • Stocks of finished goods were seen as more than “adequate” in August (+7% from 0% in July; long-run average of +12%).

Martin Sartorius, CBI principal economist, said: “With output volumes contracting at their fastest pace since the COVID-19 pandemic and order books deteriorating, this survey makes for gloomy reading for manufacturers. However, easing price pressures will bring some relief to many manufacturing firms and the broader economy.  

“The weak outlook for manufacturing activity underlines the need to double-down on delivering sustainable growth. With fierce levels of international competition, the race is on for the UK Government to offer targeted incentives to attract green investment and support firms’ decarbonisation efforts.”  

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