UK factory order books holding up 'reasonably well'

Order books are holding up “reasonably well” amid further signs of encouragement for the UK manufacturing sector, exporters revealed today.

The CBI’s monthly industrial trends survey found firms expected production to grow solidly in the next three months.

While the outlook has held steady, the survey showed inflationary pressures picked up for the second month running as manufacturers anticipate a slightly faster rise in factory gate prices in the next quarter.

CBI chief economic adviser Ian McCafferty said: “Demand is still considered to be better than it was in the first half of the year, export order books are holding up reasonably well and expectations for production growth in the coming quarter remain solid.”

The latest survey found 20% of manufacturers said total orders were above normal, while 37% said they were below. The resulting balance of minus 17% is down slightly on last month but broadly in line with the survey’s long-run average and consistent with the recent trend of improving demand.

The position on export orders weakened slightly to minus 5% but is still well above the long-term average and is much better than at the start of the year.

In terms of inflationary pressures, the CBI survey found a balance of plus 15% of firms expects to raise prices in the next three months, following on from plus 11% in the previous survey.

Howard Archer, chief UK economist at IHS Global Insight, said this would not please Bank of England policymakers after inflation remained above 3% in figures released earlier this week.

He added: “Overall, the evidence suggests that manufacturing growth is likely to have slowed in the third quarter but will nevertheless still be decent.

“Going forward, the concern is that manufacturing activity will be increasingly pressurised by tighter fiscal policy increasingly hitting domestic demand, global growth slowing and stock rebuilding winding down.”

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