CBI: UK Manufacturing Recovery Remains Steady

The UK's manufacturing sector performed strongly in the third quarter of the year, with the CBI's industrial trends survey reporting better than expected results.

Total orders rose substantially from July to August, at more than double the increase predicted beforehand. The level matched the six-month high achieved in June.

While total output in the three months to August slowed to a 10-month low, it was mainly contained within half the 18 respondent sectors and still kept well above average.

Confidence appears to be strong too. Of the 414 manufacturers surveyed, 42% expect order books to grow in value over the next quarter, with just 11% predicting a slump. One area for concern, however, is manufacturing exports.

Capital Economics' analyst Paul Hollingsworth explains: "The survey also indicated that the industrial recovery looks set to remain domestic-led. Although the export orders balance rose from -16 to -3 in August, it was still well below the overall orders balance. And other survey evidence such as the Bank of England Agents' Scores – also released today – suggest that the strength of the pound is stifling exports. So, the manufacturing recovery looks set to be strong, but not spectacular for now."

Katja Hall, CBI Deputy Director-General, said: "The outlook for UK manufacturers remains healthy, with both total and export orders firming up. Despite a dip in the pace of output growth, companies expect a strong pick-up in the next three months.

"But with growth flat at best in the Eurozone and Sterling having risen in recent months, there are still some headwinds to export demand. We need more manufacturers exporting to high-growth markets, which will help to put the recovery onto a more balanced, sustainable footing."