WIREDGOV

Growth in new manufacturing orders was the strongest since April 2011, according to the latest CBI quarterly Industrial Trends Survey. In the three months to January 2014, domestic orders rose, uncertainty about demand fell and investment intentions for the year ahead picked up.

The survey of 367 manufacturers found that growth in total order books and domestic orders was the most rapid since April 2011. Output growth remained solid, albeit slightly lower than that recorded in November and December.

Manufacturers are optimistic about continued expansion in the next quarter, with expectations of growth in new orders at its strongest since April 2012.

Manufacturing companies are increasingly confident in the recovery, which is feeding through to investment plans. Optimism about business conditions rose strongly, while the number of firms feeling that demand uncertainty was constraining investment dropped back sharply. Firms’ plans for growth in capital expenditure on buildings in the year ahead were the highest in three years.

Stephen Gifford, CBI Director of Economics, said:

“The recovery in the manufacturing sector is continuing to build and confidence has improved.

“Growth in the volume of total new orders has reached its highest rate since April 2011, and this is encouraging.

"However, now is not the time to relax and take our foot off the gas. There are still risks ahead and our manufacturers need help to break into high-growth export markets."

Key findings – three months to January 2014:

·    31% of businesses said they were more optimistic about the general business situation than three months ago and 10% less, giving a balance of +21%, little changed from October’s 18 month-high of +24%.

·   34% of businesses reported an increase in total orders and 21% a decrease, giving a balance of +13%, the highest since April 2011 (+20%).

·   The balance for new domestic orders (+11%) was the highest since April 2011 (+15%), but the balance for new export orders (0%) was down on the three months to October (+3%).

·    38% of firms reported a rise in output volumes and 20% a decline, giving a balance of +18%. This is weaker than the +29% balances recorded in November and December, but still well above the long-run average of +2%.

·    Domestic and export output prices changed little this quarter (+2% and -4% respectively) while unit costs grew a little (+7%).

Key findings – next quarter:

·    38% of manufacturers expect total new orders to increase and 16% expect them to fall, giving a balance of +22%, the highest since April 2012 (+24%). A balance of +12% expect domestic orders to rise (27% expect an increase and 15% a fall) and +14% expect export orders to go up (28% expect an increase and 14% a fall).

·    39% of firms anticipate a rise in output volume and 16% a fall, giving a balance of +23%. 28% expect employment to increase and 14% expect it to decline, giving a balance of +14%.

·    Expectations for growth in domestic output prices are the strongest in a year. 29% of firms expect to raise prices and 8% to reduce them, giving a balance of +20%. A rise in unit costs is also anticipated (balance of +7%).

·    Manufacturers' investment intentions compared with the previous 12 months improved sharply for buildings (to -1% from -20%, highest since January 2011) and plant & machinery (to +4% from -8%). They also remained robust for product & process innovation (+20% against an average of +11%) and training (+26% against an average of +12%).

·    The number of firms citing uncertainty about demand as a constraint on investment fell sharply from 59% to 45%, the lowest since October 2010.

·    65% of firms saw orders or sales as a potential constraint on output in the coming three months, the lowest since July 2012.

·    The number of firms seeing political/economic conditions abroad as a constraint on export orders in the coming three months fell for a third-consecutive quarter to 27%, the lowest since July 2012 (22%).