UK manufacturing output falls for first time since February 2021

UK manufacturing output fell for the first time since February 2021 in the three months to August, with no growth expected in the three months ahead. That’s according to the latest monthly Industrial Trends Survey from the CBI and Accenture.

Manufacturers also reported order books falling below “normal” levels, and expectations for selling price inflation picking up.

The survey, based on responses from 257 manufacturers, found:

  • Manufacturing output volumes fell in the three months to August (balance of -7%, from +6% in three months to July), marking the first time since February 2021 that output has declined. Output is expected to be broadly flat in the next three months (-2%), making a significant worsening of expectations from just a few months ago.
  • Output increased in 10 out of 17 sectors in the three months to August. The fall in headline growth reported this quarter was largely driven by food, drink & tobacco, mechanical engineering and paper, printing & media.
  • Total order books were reported as below “normal” for the first time since April 2021 (-7% from +8% in July). Export orders were also seen as below par, to the same extent as last month (-12% from -12%).
  • Stocks of finished goods were seen as broadly adequate in August, after being seen as less than adequate in the previous quarter (+2% from -7% in July).
  • Expectations for average selling price inflation have picked up (+57% from +48%) and remain well above the long-run average (+6%).

Alpesh Paleja, CBI Lead Economist, said:

“From rising prices to bottlenecks in supply chains, manufacturers continue to operate against a background of high input costs and significant operational delays. When coupled with an oncoming economic downturn, it’s not surprising to see orders and activity ebb away as we move through the year.

“With expectations for future growth subdued, steps will need to be taken to shore-up confidence in the short to medium term – particularly supporting vulnerable firms and consumers with energy price rises.

“Against a backdrop of weaker activity, a permanent replacement for the super-deduction and bold action on business rate reform remain the best ways to support capital investment plans.”

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