Manufacturers report slide in demand - CBI
By Abigail Townsend
Date: Tuesday 21 May 2019
(Sharecast News) - Manufacturing order books have slumped to their lowest level since October 2016, the Confederation of British Industry said on Tuesday, as Brexit-related stockpiling started to ease.
According to the latest CBI Industrial Trends Survey, 23% of manufacturers reported total order books that were above normal, while 32% said they were below normal, giving a monthly net balance of -10%. That was a down on April's -5%, the lowest since October 2016 and below forecasts for no change.
Manufacturers rushed to stockpile goods ahead of the original deadline for quitting the European Union of 29 March.
That supported output during the first quarter, but has now left a number of firms overstocked. The balance of firms with adequate stocks of finished goods was +25%, the highest since March 2009 and well above the long-run average of +13%.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: "The drop in the total orders balance to its lowest level since October 2016 provides the clearest indication yet that the manufacturing sector is cooling after the stockpiling-related stimulus in the first quarter.
"Demand has weakened sharply overseas - to a 35-month low - suggesting that foreign firms are running down their stocks of UK goods rather than maintaining them. Similarly domestic firms are over stocked, and they will deplete them first before placing new orders."
Anna Leach, CBI deputy chief economist, said: "These results provide further evidence that manufacturers have been stockpiling at a rapid pace as part of their Brexit contingency plans. When combined with a sharp decline in order books, it's clear why manufacturing firms are so keen to see a swift end to the current Brexit impasse.
"With investment down, stockpiling up and the threat of a no-deal ever present, we desperately need Parliament to thrash out a viable deal in the national interest."
Tom Crotty, chair of the CBI Manufacturing Council, added: "Manufacturers are being forced into putting huge amounts of money and resources into contingency planning that could have been spent on creating jobs or making investments in new technology.
"As long as the deadline continues, the sector is being held back from solving long-term challenges such as raising productivity and addressing skills shortages."
The volume of output was broadly stable in the three months to May, with 36% of firms surveyed saying it was up and 23% reporting a fall. That gave a net balance +14%, a small improvement on April's +11% and well above the long-run average of +4%.
Manufacturers expect output to be broadly flat in the coming quarter, with 27% predicting growth and 24% forecasting a decline, giving a net balance of +3%. Expectations for growth in average selling prices, meanwhile, are at the lowest since March 2016
The CBI surveyed 279 manufacturing firms between 25 April and 14 May.
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