Manufacturing output surges but price pressures loom - CBI
By Abigail Townsend
Date: Tuesday 22 Jun 2021
(Sharecast News) - Manufacturing output surged at the fastest rate on record in the last quarter, a closely-watched survey showed on Tuesday, as the UK economy continued to open up.
According to the latest CBI Monthly Industrial Trends Survey, output volumes in the three months to June grew at the fastest pace since 1975, when the Confederation of British Industry's records began. The net balance was +37, compared to +18 in May.
Growth was driven primarily by high demand in two sub-sectors: motor vehicles and transport, and food, drink and tobacco. In total, 15 of the 17 sub-sectors saw output increase.
Total order books, meanwhile, reached their strongest outrun since 1988, at +19 compared to +17 in May. The figure was also above consensus expectations of +16. Export order books improved to their firmest in more than two years, at -8 against May's -17.
Looking ahead, output is expected to grow in the next quarter, though at a slightly slower pace. But output price expectations jumped to +46 from +38, the strongest since January 1982.
Anna Leach, CBI deputy chief economist, said: "The rebound in manufacturing activity has gather pace in June.
"However, supply shortages continue to bite and firms expect that to push through into prices in the months ahead. Businesses will be closely following the news on reopening, and will be looking to government to provide some clarity on longer-term requirements on workplace testing and social distancing."
Tom Crotty, group director at chemicals firm Ineos and chair of the CBI Manufacturing Council, said: "There is a real sense of optimism from many in the sector that there are good times ahead.
"However, the picture is not all rosy, with firms continuing to face difficulties arising from supply chain disruptions and cost pressures. Staff shortages are also causing issues for many."
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: "The further jump in the total orders balance to a new survey high suggests that the industrial sector still is benefiting from strong demand from manufactured goods. Brexit, however, has constrained the recovery. While the export orders balance rose, a majority of manufacturers still reported that orders were lower than normal, despite surging global goods demand.
"Looking ahead, with households likely shifting back towards purchasing services and away from goods, as the economy reopens fully, we think that manufacturing output likely will peak in the summer before dropped back towards the end of the year."
The CBI surveyed 304 manufacturing businesses between 25 May and 11 July. The net balance is the difference between the percentage of firms reporting an increase and those reporting a decrease.
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