The survey of 482 companies found that total orders were at a 20-month high. Export orders fell (by 15%) for a second successive month, but still remained well above the long-term trend. Output growth was at its highest level since mid-2014, with 35% of businesses reporting a rise in output volumes, and 16% a fall. Only four of the 18 sectors surveyed reported a fall in production, with aerospace and mechanical engineering the main drivers of growth.
This good feeling is expected to remain into 2017, with production growth expected to remain solid. However, output price inflation is predicted, with expectations for the first three months of the year rising to their highest level since June 2011. Over a third (34%) of companies are expecting to have to raise prices, while only 8% said they will cut them. This is due to the cost of raw materials continuing to rise due to the fall in sterling.
“It’s good to see our manufacturers ending the year on a high note with growth in production the strongest since summer 2014 and total orders still robust,” said Rain Newton-Smith, CBI chief economist. “But the weakness of sterling is pushing up the cost of imports, and our survey shows strong signs of this feeding through to higher factory gate prices.
“After a challenging 2016, UK manufacturers will want to build on the positive momentum going into the new year, with the government’s recent commitments on a modern industrial strategy and innovation investment a welcome tonic.”
