The CBI’s survey of 369 manufacturers revealed that optimism about both business conditions and export prospects improved at an above-average pace over the last quarter. Growth in manufacturing output and domestic and export orders all picked up, compared with the previous three-month period. Stocks also continued to grow robustly with inventories of finished goods stocks rising at the fastest pace since October 2013.
Investment intentions for both buildings and plant & machinery moved back above average after deteriorating in the previous quarter, while spending on innovation is expected to continue to increase at a robust pace in the year ahead.
Employment grew at the fastest pace since July 2014 over the last three months, with further growth expected next quarter. However, skill shortages are high on firms’ agendas, with the number of firms citing skilled labour as a factor likely to limit output over the next three months the highest for more than four decades.
Rain Newton-Smith, CBI Chief Economist, said: “It’s good to see manufacturing going from strength-to-strength with growth up and the buoyant global economy boosting export orders. But the past depreciation in Sterling continues to leave its mark on firms’ costs and margins. With expectations for factory gate price inflation at their highest in 30 years, the pressure on consumer prices looks set to persist.
“Capacity pressures are ramping up and skill shortages are a big concern, underlining the importance of establishing a future immigration system that provides companies with access to talent and labour. The building blocks of a new system that meets economic needs and public concerns must start with scrapping the net migration target, which has never been fit-for-purpose.”
The key findings showed that 27% of firms said they were more optimistic about the general business situation than three months ago and 14% were less optimistic, giving a balance of +13%. Optimism about export prospects for the year ahead also improved at +15%, a quicker pace than the previous quarter with +7%. 33% of firms said the volume of output over the past three months was up and 12% said it was down, giving a balance of +21%, above the long-run average of +2%.
