UK manufacturers’ expectations for output growth are at their strongest for a year, but firms expect to have to raise prices, the CBI has reported.
Of the 436 manufacturers responding to the CBI’s latest monthly Industrial Trends Survey, 39 per cent believe that output would rise in the next three months, while 15 per cent expected it would fall. The balance of 24 per cent is the strongest since March 2011.
Order books in March remained well above their long-run average, and their levels of late last year, albeit a little lower than last month. While 18 per cent reported total orders were above normal, 26 per cent said they were below. The balance of -8 per cent is stronger than the long-run average for this measure.
Similarly, at -11 per cent, export demand weakened, but remained considerably above its long-run average of -21 per cent.
Expectations for output price inflation have picked up with 24 per cent of firms expecting to raise output prices in the coming quarter, the highest since June 2011 .
CBI Chief Economic Adviser, Ian McCafferty, said: “The recovery in the manufacturing sector seems to be building momentum. Firms expect a strong rise in output over the next three months, on the back of above-average order books.
“However, expectations for output price inflation have moved higher, most probably reflecting the recent rise in oil prices.
“Any further rise in oil prices would be a significant concern, given the additional cost burden this would place on UK manufacturers and the knock-on effects it could have on the recovery.”
Stocks of finished goods remained above adequate 17 per cent. The balance has changed little since November 2011, staying broadly in line with the long-run average (+14 per cent).