Published: Fri, May 19, 2017
Health | By Jay Jacobs

Manufacturing output picks up the pace

Manufacturing output picks up the pace

British factories enjoyed the biggest rise in output in more than three years in the quarter to May, as the weaker pound continued to bolster exports, according to the Confederation of British Industry (CBI).

Driven by faster growth in export orders, the balance of manufacturing companies that reporting their order books were above normal levels was +9% greater than those reporting levels below normal, which was up from a balance of +4% in April and the highest in over two years.

Rain Newton-Smith, CBI chief economist, said: "The summer sun has come out early for Britain's manufacturers".

Meanwhile manufacturers remained confident in production over the next quarter, with only 10 per cent expecting output to fall against 37 per cent looking forward to an increase.

Economists have pointed out that the CBI industrial trends survey and other survey evidence for the manufacturing sector has tended to be markedly more upbeat than the hard data from the Office for National Statistics. The pound is about 13% lower against the dollar than it was on the day of the referendum, making British-made goods cheaper overseas.

The closely-watched Markit/CIPS UK Manufacturing purchasing managers' index (PMI) for April showed activity had leapt to a three-year high on the back of strong domestic and overseas demand. This was underpinned by the mechanical engineering and chemicals sectors.

Sterling's slump since the Brexit vote has benefited United Kingdom manufacturers by making their goods cheaper for overseas buyers.

The CBI pointed out that although orders and output were up at United Kingdom factories, manufacturers were facing higher costs for imported raw materials. Pricing pressures eased on their February peak, but remain strong.

"We have mounting cost pressures and expectations for factory-gate price rises are running high", Newton-Smith, said. "Sustained investment in innovation and education will be vital to shore up the success of British industry".

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