• 28/11/2019

UK manufacturing output improves but remains weak in November – CBI

Output in the UK manufacturing sector improved more than expected in November but remained weak, according to the latest survey from the Confederation of British Industry.

The CBI’s total orders balance came in at -26 this month from -37 in October, beating expectations for a reading of -31 but still well below the long-run average of -13.

The survey found that total order books improved compared to October, when they were at their weakest level in nine years, but remained significantly below their long-run average. Export order books also strengthened compared to the previous month, when they were at their weakest since the financial crisis of 2008, but remained below the long-run average.

Output volumes fell at a similar pace to October, with output expanding in only five out of 17 sub-sectors. The headline fall in output volumes was driven largely by the motor vehicles, metal products, and metal manufacture sub-sectors.

The main positive contributors to output were the mechanical engineering and plastic products sub-sectors, while aerospace output also provided a boost.

The survey found that firms expect output volumes to be flat over the next three months.

Anna Leach, CBI deputy chief economist, said: “While the thick fog of uncertainty from a no deal Brexit has lifted somewhat, the manufacturing sector remains under pressure from weak global trade and a subdued domestic economy.

“Order books remain below average, and output volumes continue to fall. When taking into account the deteriorating outlook for manufacturing globally, it’s clear that the outlook for the sector remains precarious.

“The General Election is an opportunity for all parties to explain how they will shore up our economy. Ratifying a Brexit deal and moving on to build a vibrant future relationship with our biggest trading partner, based on frictionless trade, will be vital – both for UK manufacturers, and business as a whole.”

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said there was “no sign of a turnaround yet”.

“The CBI’s industrial trends survey remains consistent with a deepening downturn in manufacturing output, despite the partial recovery of the total orders balance in November, he said.

“The balance is not seasonally-adjusted and almost always plunges in October, before recovering in November. Our seasonally-adjusted version of the balance rose only modestly in November and points to year-over-year growth in manufacturing output declining to -3% soon, from -1.2% in September. Admittedly, the orders balance probably is overstating the severity of the downturn.

“Manufacturers are asked merely to report whether orders are above or below ‘normal’ levels; this does not provide a firm anchor for survey responses. Markit’s manufacturing survey has pointed to output falling at a more modest 1.5% year-over-year rate recently. Nonetheless, the manufacturing sector is showing no sign yet of pulling out of its recent downturn. With the Conservatives’ Brexit vision turning increasingly ‘hard’ under Mr. Johnson’s stewardship, a renewed long-term structural decline in the U.K.’s manufacturing sector potentially lies in store.”

Source: Sharecast