Manufacturing output growth accelerates, but confidence falls further
UK manufacturing output grew at its fastest pace in ten months over the quarter to May. Output still failed to keep pace with demand, however, as the volume of stocks of finished goods became less adequate compared with last month. The balance of firms expecting to raise selling prices in the three months ahead increased slightly, moving closer to March’s record high.
The survey, based on the responses of 249 manufacturers, found:
- Manufacturing output growth picked up in the three months to May (balance of +30 from +19% in the three months to April), with output increasing at the fastest rate since the three months to July 2021. Although output growth is expected to ease in the three months to July (+23%), the pace of expansion will remain comfortably above the long-term average (+9).
- Total new orders were above normal to a greater extent than last month (+26% from +14% in April), matching the record high seen in March. Export order books were above normal to the greatest extent since January 2018 (+19% from -9% in April).
- Stock adequacy for finished goods deteriorated in May (-15% from -3%). 26% of manufacturers this month said stocks were inadequate, with 11% saying that stocks were more than adequate and 54% saying they were adequate.
- Expected domestic price growth for the three months ahead picked up slightly in May (+75% from +71% in April), moving closer to March’s survey record high (+80%).
- Confidence showed a further decline in the quarter to May (-30%), while investment plans for buildings (-6%) and plant and machinery (-2%) remained weak.
Anna Leach, CBI deputy chief economist, said: “Manufacturers have reported output growth and order books improving in May. But cost pressures remain acute and are pushing manufacturers to raise prices. Sentiment among manufacturers has fallen in recent months as the outlook has deteriorated following Russia’s invasion of Ukraine, and investment plans are being scaled back.
“Rising costs are hitting consumers and businesses alike, and the Government can and must take action now to support the economy through the challenging months ahead. Putting pounds in the pockets of people already struggling should not be delayed, and must be coupled with action to support firms’ cashflow and to stimulate investment.”