Manufacturing output picks up as year comes to a close

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Manufacturers reported that output growth picked up in the three months to December, according to the latest monthly CBI Industrial Trends Survey.

The survey of 346 manufacturers found that output growth picked up in the three months to December, rising further above the long-run average. Output expanded in 15 out of 17 sub-sectors, with growth driven predominantly by the food, drink, & tobacco, mechanical engineering, and chemicals sub-sectors. However, firms expect output growth to slow somewhat over the next three months.

Total order books remained firm in December, staying well above their long-run average. Export order books improved noticeably and are now at their strongest since January this year.

Expectations for output price inflation were slightly higher this month, above the long-run average. However, they remain below the highs seen at the turn of 2018. At the same time, the level of stocks was reported to be broadly adequate, having generally remained at this level since July.

While UK manufacturers should continue to be supported by firm global economic growth and a low sterling exchange rate, subdued domestic momentum and ongoing Brexit uncertainty will pose headwinds to manufacturing activity.

Anna Leach, CBI Head of Economic Intelligence, said: “The UK’s manufacturing sector enters the Christmas period with a small upswing, with output growth gathering further pace. The firming in exports orders is also particularly welcome.

“But uncertainty over Brexit still casts a long shadow over this sector and the rest of the economy. Politicians must finally stop the endless infighting and come together to secure a workable solution, or we’re in danger of edging closer to a no-deal Brexit.”

Tom Crotty, Group Director of INEOS and Chair of the CBI’s Manufacturing Council, said: “It is encouraging to see the resilience of the UK’s manufacturing sector shining through as we approach the end of a difficult year. However, firms are under no illusion that a failure by the government to secure a viable Brexit solution would bring further uncertainty in 2019.

“The government could bring some Christmas cheer to the manufacturing sector by delivering on a Brexit deal that achieves continued frictionless trade with the EU and a transition period.”