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Manufacturing rebounds from slowdown, CBI survey says
UK manufacturing recovered in June, suggesting a turnaround for factory output after a slowdown earlier in 2018, a CBI survey showed.
Manufacturing output rose at its fastest pace since December 2017 in the three months to June, according to the CBI's survey of 388 companies. Growth was broad-based with output expanding in 14 out of 17 sub-sectors, led by food, drink and tobacco and mechanical engineering. Order books revived to levels recorded at the end of 2017 and export orders were stable.
The CBI's industrial trends survey found 33% of manufacturers with order books above normal and 20% below normal giving a balance of +13 - a major improvement on May's balance of -3. In June 43% of businesses reported higher output and 13% said it was down. The balance of +29 was the strongest showing since December 2017 and a rebound from May's flat result.
The positive findings in June followed three months of gloomy surveys that resulted in output slowing to its weakest for more than two years in May. The run of weak surveys had raised concerns that manufacturing was suffering from slowing external demand and not short-term wintry weather.
Anna Leach, the CBI's head of economic intelligence, said: "The recovery in orders and a return to bumper growth in production suggests the lull in manufacturing activity may be over. While risks to demand persist from Brexit and escalating global trade tensions, firms can work with the government to nurture a pro-enterprise environment that helps UK growth to shift up a gear."
The buoyant survey suggests manufacturing has remained a bright spot for the UK economy, which is suffering from weak consumer spending power and economic uncertainty over Brexit. The CBI cut its growth forecast on 8 June, citing business concerns about leaving the EU and protectionist rhetoric for sluggish investment.
Economists at Pantheon Macroeconomics said the survey "provides reassurance" that the sector's revival hasn't run out of steam, following the sudden 1.4% month-to-month decline in the official measure of manufacturing output in April.
"Producers, however, appear to be taking a margin hit in order to protect demand; the price expectations balance fell to an 11-month low of +13, despite the jump in oil prices over the last three months," Pantheon said.
"Meanwhile, investment in the manufacturing sector likely will remain subdued, given that the medium-term outlook remains clouded by Brexit and the threat of a global trade war. As a result, capacity constraints likely will bite soon, preventing a prolonged period of strong growth in manufacturing output from taking hold."