Strong output growth reported by UK manufacturers

The latest quarterly Industrial Trends Survey of 397 manufacturers also found that employee headcount increased at the fastest rate for three years, while hiring intentions for the coming quarter also improved, as did optimism.

Growth in total orders moderated in line with expectations, but remained robust, CBI adds. Domestic orders expanded at a strong pace and growth in export orders also remained brisk.

Additional findings show that output growth is also expected to continue to grow strongly in the quarter ahead and manufacturers are upbeat about prospects for overall demand. Domestic orders are expected to continue growing strongly, while expectations for growth in export orders improved to a four-decade high.

Firms also accumulated raw materials at the fastest pace since April 1977 and stocks of work-in-progress expanded at a record rate. Meanwhile, input cost pressures cooled in the quarter to July and are expected to soften further, while factory gate price inflation is also expected to be more subdued.

Says CBI chief economist Rain Newton-Smith: “Output growth among UK manufacturers is the highest we’ve seen since the mid ‘90s, prompting the strongest hiring spree we’ve seen in the last three years. Cost pressures are easing and firms are upbeat about the outlook for export orders.

“It’s great to see the benefits from the decline in sterling for UK exporters feeding through. But the flipside is the broader hit to consumer spending power across the economy from stronger inflation, which is likely to have fuelled the slowdown in the economy in Q1 and is expected to pull down growth in Q2.”