Manufacturing growth hit by decline in exports

Growth in orders and output is expected to continue, according to CBI survey

The recovery in British manufacturing continued in the three months to October, but the pace of growth slowed as new export orders declined, according to the latest CBI Quarterly Industrial Trends Survey.

The survey of 448 firms reported sustained above average growth in orders and output volumes. It found that 31% of businesses reported an increase in total new orders, and 21% a decrease, giving a balance of +9%.

The rate of expansion in domestic new orders eased a little, and export orders experienced their first decline in a year-and-a-half.

The numbers employed in the manufacturing sector also continued to grow at a strong pace, with 27% of manufacturers reporting employment numbers were up, and 12% said they were down, giving a balance of +15%.

Rain Newton-Smith, CBI director of economics, said: “It’s disappointing that a sluggish exports market has taken some of the steam out of manufacturing growth, which was going from strength to strength throughout most of this year.

“However, growth in orders and output is expected to continue ahead, albeit with expectations moderating, and domestic orders have continued to rise at a healthy pace. And it is encouraging that job numbers are growing.

“Nevertheless, the manufacturing sector is clearly facing headwinds. Global political instability, mounting concerns about weakness in the eurozone and recent rises in Sterling are all weighing on export demand.”

The survey found that firms anticipate continued growth for the next three months, but there are reduced expectations for total new orders and exports growth.

However, manufacturers’ investment intentions compared to the previous 12 months slipped slightly for plant and machinery (+5%) and product and process innovation (+25%). They remained the same for training (+27%) but fell to their weakest level in a year for buildings
(-14%).

The proportion of firms concerned that political and economic conditions abroad may limit export orders remained above its long-run average for the second successive quarterly survey.

Separately, the CBI published monthly figures for October, which showed that total order books among manufacturers edged down to
-6%, the lowest level since July 2013 (-12%). Export order books also remained weak relative to earlier in the year (-23%), but output grew (+11%).

The October 2014 CBI Industrial Trends Survey was conducted between 18 September and 8 October.