Manufacturing optimism in the three months to April improved at its quickest pace since April 1973, while investment intentions saw a strong, broad-based rebound, according to the latest CBI quarterly Industrial Trends Survey.
The CBI survey of 288 manufacturers found that firms expect to increase capital expenditure on buildings, plant & machinery, product and process innovation, and training & retraining in the next year (relative to the last). In particular, investment intentions for plant and machinery were at their strongest since July 1997.
Manufacturing output was broadly flat in the quarter to April, while total new orders grew at the quickest pace since April 2019. Both output and orders growth are expected to pick up rapidly in the next quarter. Domestic orders grew at their fastest pace since July 2018 and firms anticipate this will improve further. Meanwhile, export optimism for the year ahead strengthened after successive decline over almost three years. New export orders stabilised after falling for nearly two years and are expected to hold steady in the quarter ahead.
Cost pressures continue to temper the outlook for the manufacturing sector, however. Average costs growth in the quarter to April accelerated at its quickest pace since April 2011, and costs are expected to grow at a similarly rapid rate next quarter. Meanwhile, average domestic prices in the quarter to April grew at their fastest pace since July 2018 and are expected to accelerate further next quarter.
Numbers employed grew at their fastest rate since April 2019. Headcount growth is expected to accelerate further over the next three months, with expectations at their strongest since April 1974.
Rain Newton-Smith, CBI Chief Economist, said:
Tom Crotty, Group Director at INEOS and Chair of the CBI Manufacturing Council added:
The CBI survey shows:
- Output volumes in the quarter to April were broadly flat (+3% from +3% in March).
- Output grew in 11 out of 17 sub-sectors, with growth in the electronic engineering and aerospace sub-sectors offset by declines in food, drink & tobacco and motor vehicles.
- Manufacturers expect output to pick up rapidly next quarter (+36%).
- Total new orders in the quarter to April grew at their quickest pace since April 2019 (+5% from -12% in January). Domestic orders expanded at their fastest rate since July 2018 (+6% from -20% in January) while export orders were flat (-3% from -13% in January).
- Manufacturers expect total new orders growth to accelerate next quarter (+20%). Domestic orders growth is anticipated to quicken (+17%), while export orders are expected to be relatively unchanged (-5%).
- Numbers employed in the three months to April (+10% from -10% in January) grew at their quickest pace since July 2018. Firms expect headcount growth to accelerate further next quarter (+19%) with expectations at their strongest since April 1974.
Costs and prices
- Average cost growth in the quarter to April (+48% from +34%) accelerated to its quickest pace since April 2011 (+53%).
- Average domestic prices grew in the quarter to April (+19% from +7%) at their fastest pace since July 2018 and are expected to accelerate further next quarter (+27%).
- Average export prices (+10% from +5%) grew at their quickest rate since October 2019 but are expected to slow slightly next quarter.
- Business sentiment in the quarter to April (+38% from -22% in January) grew at the quickest pace since April 1973 (+41%). Export sentiment (+8% from -23) grew at the fastest rate since April 2018.
- Investment intentions for the next year saw a broad-based improvement, with firms expecting to spend more on buildings, plant & machinery, product & process innovation, and training & retraining compared to last year.
- Intentions across all categories were at their strongest in multiple years, most notably for plant & machinery (strongest since July 1997).
- The most common reasons cited for expected capital expenditure authorisations were increased efficiency (66%) and replacement (63%).
- The share of firms citing uncertainty about demand as a factor to limit investment in the next year declined to its lowest since April 2018 (46%).