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CBI reveals upbeat manufacturing data
The UK's manufacturing sector performed strongly in the last quarter, according to the latest data from the CBI.
The trade body's latest Industrial Trends Survey revealed the total orders balance for January was +14, down from +17 in December, although it beat market predictions of +12.
Manufacturing output along with domestic and export orders all picked up in the past three months compared to the previous period. The survey showed that 40% of businesses reported an increase in new orders, and 17% a decrease, giving a balance of +23%.
Also increasing was investment intentions for buildings and machinery, while optimism across the 369 manufactures surveyed was above average for both business conditions and export prospects.
However, while employment grew at the fastest pace since July 2014 during the quarter - 31% said employee numbers were up and 11% said they were down, giving a rounded balance of 20% - manufacturers sounded a note of caution. They warned that skills shortages remained, and that capacity was stretched; the proportion of firms with spare operating capacity was the lowest in 29 years.
Prices are also expected to grow: looking ahead, 22% said export price growth would pick up, while expectations for domestic price growth was the strong strongest since January 1984.
CBI chief economist Rain Newton-Smith cautiously welcomed the survey results. "It's good to see manufacturing going from strength to strength, with growth up and the buoyant global economy boosting export orders. But the past depreciation in sterling continues to leave its mark on firms' costs and margins. With expectations for factory gate price inflation at their highest in 30 years, the pressure on consumer prices looks set to persist.
"Skills shortages are a big concern, underling the importance of establishing a future immigration system that provides companies with access to talent and labour."
Analysts at Pantheon Macroeconomics said manufacturers were failing to make the most of the rebound in the global economy, citing skills and labour shortages, low levels of investment and capacity constraints.
"Order books are surging, but producers' expectations for growth in output over the next three months are only modestly above their long-run average.
"All told, manufacturers are doing well, but they continue to lag their peers overseas, ensuring that the UK remains one of the worst-performing advanced economies this year."