Sunday, March 3, 2024

Manufacturing price expectations hit new high

UK manufacturing output grew at a brisk pace in the three months to March, but the balance of manufacturers expecting to increase prices rose to a survey record high, according to the latest monthly CBI Industrial Trends Survey.

The survey, based on 229 responses, found:

  • The balance of manufacturers expecting to raise prices in the next three months rose to a survey record high in March (+80% from +77% in February, a question first asked in Jan 1975).
  • Output volumes continued to grow at a robust pace in the three months to March (balance of +27% from +26% in the three months to February), with a similar rate expected in the three months ahead (+30%).
  • Output increased in 10 out of 17 sectors, with growth driven by the motor vehicles and chemicals sub-sectors.
  • Total order books matched the record level seen in November 2021 (+26% in March, from +20% in February, question first asked in April 1977). Export order books were above normal to the greatest extent since March 2019 (+7% from -7% in February).
  • Stocks of finished goods were seen as inadequate in March but improved for the third consecutive month (-8% from -14%).

Anna Leach, CBI deputy chief economist, said: “This survey highlights strong order books and output growth, but the cost pressures facing manufacturers have been amplified by the conflict in Ukraine.

“To deliver a fundamental reset to UK growth, we need to see significant action to incentivise investment, a key driver of productivity growth and the only way to sustainably increase real wages. A permanent successor to the Super Deduction will ensure that economic resilience and growth go hand-in-hand.”

Tom Crotty, group director at INEOS and chair of the CBI Manufacturing Council, said: “It is positive to see that total order books remained strong in March, with export orders above normal to the greatest since extent since March 2019. Manufacturing output volumes also grew at a significant pace in the first three months of 2022.

“However, the Ukraine conflict has created further headwinds to an already challenging context for the manufacturing sector. The primary business focus is of course on supporting the humanitarian crisis and evaluating their operations in Ukraine and Russia.

“But the shock to energy and other commodity markets, along with the potential for trade spillovers, will further add to the cost-of-living squeeze. Manufacturers will be looking to the upcoming Spring Fiscal Event to provide support through these challenges.”

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